Summary
In Flutie Bros., the court held that plaintiff had "sufficiently alleged negligent conduct" in that the defendant, inter alia, failed to retain expert witnesses.
Summary of this case from Marine v. CalabreseOpinion
04 Civ. 4187 (DAB).
May 18, 2006
MEMORANDUM ORDER
Plaintiff Flutie Entertainment U.S.A., Inc. f/k/a Flutie Bros. LLC, has filed the above-captioned case against Defendants Edward W. Hayes and Edward W. Hayes, P.C. for legal malpractice, breach of contract, breach of fiduciary duty, breach of fiduciary and fraud and violations of Section 487 of the Judiciary Law.
Plaintiff characterizes its first cause of action as "professional negligence in giving erroneous advice" and also refers to it in the Complaint as "professional negligence and malpractice." (Compl. ¶ 39.) The claim is subsequently referred to as a legal malpractice claim by both Parties in their Memoranda of Law.
Defendants have moved to dismiss Plaintiff's legal malpractice, breach of contract, breach of fiduciary duty and breach of fiduciary duty and fraud claims pursuant to Fed.R.Civ.P. 12(b) (6) and 9(b). Plaintiff opposes the Motion to Dismiss.
For the reasons that follow, Defendants' Motion to Dismiss is GRANTED.
I. BACKGROUND
The following facts are taken from the Complaint and are accepted as true by the Court for the purposes of this Motion to Dismiss.
Plaintiff Flutie Entertainment USA, Inc., formerly known as Flutie Bros. LLC ("Flutie Bros."), is a corporation incorporated under the laws of the State of Florida with its principal office in Beverly Hills, California. Defendant Hayes is an attorney with his office and practice under the name Edward W. Hayes, P.C., in New York, NY.
In or around mid-December, 2002, Plaintiff was served with a complaint in an adversary proceeding titled In re Flutie New York Corp., d/b/a Company Management, Case. No. 02-14069, Adv. Pro. No. 02-03878 ("Adversary Proceeding") in the United States Bankruptcy Court for the Southern District of New York. The Adversary Proceeding was commenced by David Kittay, as Chapter 7 Trustee of Flutie New York Corp., d/b/a Company Management, ("Flutie N.Y.") against Flutie N.Y., Albert Flutie, Michael Flutie, Flutie Media Corp., Flutie Interactive, Inc., Flutie Entertainment Corp., and Flutie Bros. LLC (the Plaintiff in this action). (Compl. ¶ 6.)
Shortly after December 25, 2002, Robert Flutie, who was an officer of Flutie Bros., provided Defendant Hayes with a copy of the complaint in the Adversary Proceeding and sought his advice and potential representation with regards to the Adversary Proceeding. Robert Flutie also provided Hayes with facts underlying the allegations in the complaint in the Adversary Proceeding. (Id. ¶ 8.)
In early January, 2003, Hayes and Robert Flutie held a meeting to discuss Hayes' view of the Adversary Proceeding. At that meeting, Plaintiff alleges that Hayes told Robert Flutie that while the Trustee was making very serious allegations against other parties in the Adversary Proceeding, he did not see how Flutie Bros. had anything to do with, or would have any liability regarding the allegations made in the complaint. According to Plaintiff, based on prior dealings, Hayes was familiar with the business and structure of Flutie N.Y., and Michael Flutie, the President of Flutie N.Y., and was generally familiar with the structure and business of Flutie Bros. (Id. ¶¶ 10-11.)
During this meeting, Robert Flutie, on behalf of Plaintiff, retained Hayes to represent Plaintiff in the Adversary Proceeding. As payment, Plaintiff provided Hayes with two checks for the sum of $7,500.00 each. Only one of the checks was cashed by Hayes. Plaintiff and Hayes did not sign a written retainer agreement. (Id. ¶ 14.) Hayes indicated to Robert Flutie that he would not have to put a lot of work into the matter and also stated that since he saw no reasonable way that Plaintiff could be found liable, he would be able to get Plaintiff released from any claims without much difficulty. (Id. ¶¶ 12-16.)
In mid- to late January, 2003, during a telephone call between Robert Flutie and Hayes, Hayes told Robert Flutie that he had spoken to Bijan Amini, counsel for the Trustee in the Adversary Proceeding, and Hayes had made Amini understand that Plaintiff had nothing to do with the other defendants and that Plaintiff should be released or dismissed from the Adversary Proceeding. (Id. ¶ 17.)
Robert Flutie next spoke to Hayes in mid-February, 2003, when he called Hayes to discuss the progress of the case. During that telephone conversation, Hayes stated that he had received an extension of time to file an answer to the complaint on Plaintiff's behalf. Hayes stated further that he did not believe an answer was necessary and that he did not wish to file an answer because he wanted to continue to work on convincing the Trustee and Bijan Amini to release Plaintiff from the Adversary Proceeding. (Id. ¶¶ 18-19.)
Shortly after the first pretrial conference in the Adversary Proceeding, Robert Flutie learned that Hayes had not attended that conference. When Robert Flutie brought this up with Hayes, Hayes stated that he had not been aware of the conference. Hayes also advised Flutie that he would contact Amini and get back to him. Hayes subsequently contacted Flutie to confirm that he had in fact missed the conference, "but it was no big deal." Throughout his engagement as counsel for Plaintiff, Hayes missed three out of four pretrial conferences in the Adversary Proceeding. (Id. ¶¶ 22-23.)
Between January, 2003 and October, 2003, Plaintiff did not receive any correspondence or notice of discovery with respect to the Adversary Proceeding from Hayes. Upon information and belief, Hayes did not prepare any notices for discovery, nor did he conduct any discovery. Hayes' strategy throughout his tenure as counsel for Plaintiff was to have Plaintiff "lie low" because, according to Hayes, the Trustee could never prove any of its claims against Plaintiff. (Id. ¶ 24.)
The only time Hayes participated in any form of discovery was during the deposition of Robert Flutie as representative of Plaintiff, taken by Amini on behalf of the Trustee in September, 2003. Robert Flutie participated by telephone from California and Hayes and Amini participated from Amini's office in New York. Hayes had not prepared Robert Flutie for the deposition beforehand. During the deposition, Hayes did not offer objections or conduct any examination and slept through "much, if not most" of the deposition. (Id. ¶¶ 26-27.)
In or about October, 2003, Hayes advised Robert Flutie that a trial was scheduled and would take place in or about December, 2003. Hayes further advised Robert Flutie that though he had some personal experience in Bankruptcy Court, it might be better if Robert Flutie hired experienced bankruptcy counsel to replace him in the upcoming trial. (Id. ¶ 31.)
After learning this from Hayes, Plaintiff "was forced to retain new trial and Bankruptcy counsel only three (3) weeks before the trial was held." Subsequent counsel advised Robert Flutie that due to Hayes' failure to conduct discovery, retain expert witnesses and answer the complaint, the upcoming trial in the Adversary Proceeding would be a "tricky and difficult matter." (Id. ¶ 32.) Subsequent counsel filed an answer on October 14, 2003. (Furman Aff. at Ex. F.)
The trial in the Adversary Proceeding resulted in a judgment of more than $191,089.00 against Plaintiff. (Id. ¶ 29.) The Bankruptcy Court based this judgment on its finding that Flutie N.Y. had fraudulently transferred corporate monies in the amount of $191,089.00 to Flutie Entertainment, and that Flutie Bros. was a successor in interest to Flutie Entertainment.
The Bankruptcy Judge made the following findings and referred to the following testimonial and documentary evidence presented at trial:
• Flutie Entertainment was an entity controlled and dominated by brothers Michael and Robert Flutie. Flutie Entertainment operated out of Flutie N.Y. offices and another entity owned by the Fluties. (Bankruptcy Court's Findings of Fact ¶ 77.)
• Robert Flutie worked for Flutie N.Y. between 1992 and 1995; in 1996 he took over Flutie Entertainment. (Id. ¶ 78.)
• Flutie N.Y. and Flutie Entertainment shared the same models and did so pursuant to contracts the models had with Flutie N.Y. (Id. ¶ 83.)
• Published articles illustrated the interconnected relationship between Michael Flutie, Flutie N.Y. and Flutie Entertainment. (Id. ¶ 85.)
• Michael Flutie testified at the trial that "the only thing we did at Flutie Entertainment really is sort of take the assets of Company Management and look within our organization to see who had potential and go on to develop them." (Id. ¶ 86.)
• Flutie N.Y. paid all of the operating expenses for the office space located at 270 Lafayette Street, which included the space occupied by Flutie Entertainment. Flutie N.Y. also advanced monies to Flutie Entertainment at least up until 1999 so that Flutie Entertainment could operate. (Id.)
• Flutie N.Y.'s books and records, confirmed by Robert Mayer, accountant for Flutie N.Y., demonstrate that at least $191,089.00 was owed to Flutie N.Y. by Flutie Entertainment. No records showed that Flutie N.Y. was ever reimbursed for these payments. (Id. ¶¶ 87-88.)
• After discussions with Robert Mayer that it was "necessary" to cut off the money being spent on Flutie Entertainment, to shut it down and to create a different corporate entity in order to continue running the Flutie Entertainment business, Robert Flutie created Flutie Bros. in November, 1999. (Id. ¶¶ 89-91.)
• Flutie Bros. proceeded to take over the business of Flutie Entertainment; no consideration was paid for the transfer of business. (Id. ¶ 91.)
• Flutie Bros. used the Flutie Entertainment space and shared Flutie N.Y.'s office equipment, vendor accounts, insurance policies and employees, and its health and dental plans. (Id. ¶ 92.)
• At the end of 2002, Robert Flutie was advised to change Flutie Bros. to a subchapter S corporation. Flutie Entertainment USA was thus formed and a statutory merger occurred with Flutie Entertainment USA acquiring Flutie Bros. No consideration was paid for this transfer. (Id. ¶ 93.)
Based upon these facts, derived from testimonial and documentary evidence, the Bankruptcy Judge found that Flutie N.Y., the debtor, was insolvent from 1997 through the Petition Date. (Conclusions of Law ¶ 7.) Hence, he concluded that the transfer of money in the amount of $191,089.00 made to Flutie Entertainment, within one year of Flutie N.Y.'s bankruptcy filing, was fraudulent. The Bankruptcy Judge stated that he specifically considered the testimony of the Trustee's expert, Jeffrey Katz, Katz' report, the few financial documents provided by Flutie N.Y., as well as documents found by the Trustee through his own efforts, in coming to this conclusion. Part of the documentary evidence relied upon by the Bankruptcy Court consisted of Flutie N.Y.'s tax returns, which showed negative retained earnings for the years 1995 and 2001. The Bankruptcy Judge noted that Defendants "tried to refute an inference of insolvency with the argument that the fair value of the model contracts were never investigated," yet they did not present any evidence that the tax returns should not be relied upon by the court. (Id.) The Bankruptcy Judge found Katz' testimony to be "straightforward and intelligent" and that he "exhibited a thorough knowledge of the financial situation of Flutie N.Y., as based upon available documentation." The Bankruptcy Judge "credited his testimony." (Id. ¶ 102.) The Bankruptcy Judge gave the weight of Robert Mayer, accountant for Michael Flutie, however, "less weight" based on "his role as advisor, his professed general lack of knowledge of the specific activities of Flutie, N.Y., his lack of disinterestedness, as well as his questionable and perhaps subjective understanding . . . of what may or may not constitute tax fraud. . . ." (Id. ¶ 105.) He also found both Michael Flutie and Robert Flutie to be evasive when testifying, even going so far as to state that Robert Flutie answered questions with "Three Card Monte-type tactics." (Id. ¶¶ 103-04.)
The Bankruptcy Judge also found that "the facts are abundantly clear that Flutie Bros. was little more than a continuation of Flutie Entertainment." (Id. ¶ 20.) He found that Flutie Bros. continued to do business under the name "Flutie Entertainment" and Robert Flutie controlled both Flutie Entertainment and Flutie Bros. Flutie Bros. performed essentially the same business functions Flutie Entertainment had. The Bankruptcy Judge also found that a substantial number of the talent represented by Flutie N.Y. was later represented by Flutie Bros. doing business as Flutie Entertainment, and that sufficient evidence was present to show that Flutie Entertainment was shut down to allow Robert Flutie to use the "Flutie Entertainment brand through his new company Flutie Bros. without assuming any of Flutie Entertainment's liabilities." (Id.)
Plaintiff appealed the judgment. (Compl. ¶ 34.) However, due to the liability incurred by Plaintiff in the Adversary Proceeding, Plaintiff withdrew the appeal and "was compelled" to conclude a settlement agreement with the Trustee for the sum of $150,000.00. Plaintiff alleges that it also expended more than $50,000.00 in connection with this settlement and estimates that this sum will rise to $75,000.00. Plaintiff spent an additional $85,000.00 in connection with legal representation by subsequent counsel in the Adversary Proceeding. (Id. ¶¶ 35-36.)
Plaintiff has brought this diversity action against Defendants Hayes and his law practice, Edward W. Hayes, P.C. alleging six causes of action against Defendants for legal malpractice, breach of contract, breach of fiduciary duty, breach of fiduciary duty and fraud and violations of Judiciary Law § 487. Plaintiff further seeks judgment against Hayes for punitive damages in connection with the breach of fiduciary duty claims.
II. DISCUSSION
Defendants have moved to dismiss the legal malpractice, breach of contract, breach of fiduciary duty, and breach of fiduciary duty and fraud claims asserted in Plaintiff's Complaint pursuant to Fed.R.Civ.P. 12(b)(6) and 9(b).
Defendants inexplicably move to dismiss the fourth cause of action, which alleges fiduciary duty and fraud, but fail to move to dismiss the fifth cause of action, which alleges the same. Both counts, however, appear to allege the same conduct by Hayes: that he breached his fiduciary obligations to his client, Plaintiff, and that Hayes fraudulently induced and misled Plaintiff to continue its retention of Hayes as its counsel and then fraudulently concealed his negligence from Plaintiff. Accordingly, the Court will construe Defendants' Motion to Dismiss the breach of fiduciary duty and fraud as applicable to both of those claims.
A. Legal Standard for Motion to Dismiss
In a motion to dismiss under Fed.R.Civ.P. 12(b)(6), the Court "must accept as true the factual allegations in the complaint, and draw all reasonable inferences in favor of the plaintiff." Bolt Elec., Inc. V. City of New York, 53 F.3d 465, 469 (2d Cir. 1995) (citations omitted). "The district court should grant such a motion only if, after viewing plaintiff's allegations in this favorable light, it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Harris v. City of New York, 186 F.3d 243, 247 (2d Cir. 1999). A court's review of such a motion is limited and "the issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Berhneim v. Litt, 79 F.3d 318, 321 (2d Cir. 1996). Dismissal is not warranted "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of [its] claim which would entitle [it] to relief."Cooper v. Park, 140 F.3d 433, 440 (2d Cir. 1998) (quotingConley v. Gibson, 355 U.S. 41, 45-46 (1957)).
B. Legal Malpractice Claim
It is well-established that in order to state a claim for legal malpractice under New York law, a Plaintiff must allege "(1) the negligence of an attorney; (2) the negligence was the proximate cause of the loss sustained; and (3) proof of actual damages."Rondout Landing at the Strand, Inc. v. Hudson Land Development Corp., 361 F.Supp. 2d 218, 223 (S.D.N.Y. 2005). In order to plead causation adequately in a legal malpractice claim, the plaintiff must show that but for the attorney's negligence, "what would have been a favorable outcome was an unfavorable outcome. The test is whether a proper defense would have altered the result of the prior action." D'Jamoos v. Griffith, No. 00 Civ. 1361, at *5 (E.D.N.Y. Aug. 1, 2001). See also Pellegrino v. File, 738 N.Y.S. 2d 320, 323 (1st Dep't) (citations omitted), lv denied, 98 N.Y.2d 606 (2002). This causation requirement, a high bar to attorney malpractice liability, "seeks to insure a tight causal relationship exists between the claimed injuries and the alleged malpractice, and demands a nexus between loss and injury. . . ." Sloane v. Reich, No. 90 Civ. 8187, 1994 WL 88008, at *3 (S.D.N.Y. Mar. 11, 1994). The "`but for' prong requires the trier of fact in effect [to] decide a lawsuit within a lawsuit, because it demands a hypothetical re-examination of the events at issue absent the alleged malpractice." Littman Krooks Roth Ball, P.C. v. New Jersey Sports Prod., Inc., No. 00 Civ. 9419, 2001 WL 963949, at *3 (S.D.N.Y. Aug. 22, 2001) (citing N.A. Kerson Co. v. Shayne, Dachs, Weiss, Kolbrenner, Levy, et al., 397 N.Y.S.2d 142, 143 (2d Dep't 1977) (internal quotations marks omitted).
As an initial matter, the Court finds that Plaintiff has sufficiently alleged negligent conduct by Hayes. Plaintiff alleges several failures by Hayes during his representation of Plaintiff in the Adversary Proceeding. Specifically, Plaintiff alleges that Hayes neither conducted discovery nor retained expert witnesses, that Hayes did not depose or otherwise conduct discovery in connection with the Trustee's expert witnesses, nor did he ever file an Answer. (Id. ¶¶ 26, 28.) Hayes also missed pretrial conferences and slept through the deposition of Robert Flutie. (Id. ¶¶ 23, 26.)
Defendants argue, however, that Plaintiff's claim fails because it has failed to allege "but for" causation since subsequent counsel had adequate time prior to trial in the Adversary Proceeding to prepare a defense and thus rectify any damage that Defendants' alleged negligence might have caused. (Defs.' Mem. of Law at 18.)
Plaintiff responds that it has adequately alleged "but for" causation by stating that Hayes' failure to provide a separate defense to Flutie Bros led to the court lumping together the various Flutie entities, and that Hayes' failure to depose models whose contracts were supposedly transferred from Flutie N.Y. to Flutie Bros. prevented the court from learning that the models had not been clients of Flutie N.Y. at the time they retained Flutie Bros. to represent them. (Pl.'s Mem. Law at 11-12.) Plaintiff alleges that this discovery would have established the "industry practice and reality that it is virtually impossible to prevent models from ignoring their contracts and moving to any other model or talent management firms, or the like." (Compl ¶ 25.)
Plaintiff also alleges that Hayes' failures included his refusal to discuss whether it was necessary or appropriate to retain an expert witness to testify on the following issues: (i) whether the practice in the industry of models moving freely between model and talent management companies prevented any finding that the model contracts of Flutie Entertainment, Inc. were transferred to Flutie Bros; (ii) whether model contracts were substantively enforceable in the model and fashion industry; (iii) whether there was any substantial residual or "going forward value" in those contracts, when considering whether Company Management was solvent or insolvent; and (iv) whether Flutie Bros. was a "successor in interest" of Flutie Entertainment and therefore liable for loans from Company Management in the amount of $191,000.00. (Compl. ¶ 29.) It appears that Plaintiff's argument is that had such an expert been retained, Flutie N.Y. would not have been found insolvent and Flutie Bros. would not have been found a successor in interest of Flutie Entertainment.
It is clear that the Bankruptcy Judge, in finding Flutie Bros. liable to the Trustee for $191,089.00, did so without lumping Flutie Bros. with the other Flutie entities, as Plaintiff alleges. Unlike some of the other entities, who were found to be recipients of fraudulent transfers of model contracts, Flutie Bros. was found to be liable only for $191,089.00 in loans given to Flutie Entertainment by Flutie N.Y. This conclusion, as well as the Bankruptcy Judge's conclusion that Flutie Bros. was the successor in interest of Flutie Entertainment, was based on testimony at trial, and documents admitted during the trial.
The type of evidence Plaintiff contends that Hayes should have obtained, and the information he could have gleaned from the depositions he should have taken, would not have changed the Bankruptcy Court's determinations on whether Flutie Bros. was a successor in interest to Flutie Entertainment. For example, Plaintiff appears to argue that Hayes should have taken depositions to show that Flutie N.Y. was not insolvent at the time it made the transfer of $191,089.00 to Flutie Entertainment. However, it is not clear how another company, purportedly not related to Flutie N.Y., could demonstrate solvency when the tax returns of Flutie N.Y. itself, as the Bankruptcy Judge noted, consistently reflected negative earnings, and the company, Flutie N.Y. did not provide the court with any reason not to rely on Flutie N.Y.'s tax returns. Plaintiff also has failed to demonstrate how evidence of industry practice of model contracts would have belied the evidence before the Bankruptcy Judge, that it was not a successor in interest of Flutie Entertainment. Nor has Plaintiff demonstrated how an expert's testimony on model contracts, and the practice of the model industry, would have been sufficient to contradict the testimony of the Trustee's expert, Katz, or to bolster and/or rectify the damage done by the testimony of the principals, Michael and Robert Flutie. Plaintiff's hodgepodge of arguments of things it alleges Hayesshould have done, do not in any way demonstrate that these failures would have changed the Bankruptcy Judge's determinations.
It is clear to this Court that Plaintiff's pleadings do not sufficiently allege "but for" causation. Accordingly, Defendants' Motion to Dismiss the legal malpractice claim is GRANTED.
Defendants also argue that Plaintiff has failed to allege actual damages, as required by the third prong of the legal malpractice standard. According to Defendants, the damages alleged by Plaintiff are merely speculative since Plaintiff settled the underlying action rather than appealing the judgment against it and damages "would have remained speculative pending the outcome of the Appeal." However, because the Court has found that Plaintiff has failed to allege "but for" causation, it does not reach the merits of this argument.
C. Breach of Contract Claim
Under New York law, a sufficient pleading of a breach of contract claim must allege: "(1) the existence of a contract, (2) plaintiff's performance under the contract, (3) defendant's breach of the contract, and (4) resulting damages. Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 525 (2d Cir. 1994). A breach of contract claim is generally duplicative of a legal malpractice claim, see Turk v. Angel, 293 A.D.2d 284 (2000), unless a lawyer promises a specific result to his client or breaches an implied promise of due care. See Bastys v. Rothschild, No. 97 Civ. 5154, 2000 WL 1810107, at *28 (S.D.N.Y. Nov. 21, 2000) and Gaddy v. Eisenpress, No. 99 Civ. 3781, 1999 WL 1256242, at *4 (S.D.N.Y. Dec. 27, 1999). However, if the contract claim is merely redundant of a timely malpractice claim, it shall be dismissed. Schweizer v. Mulvehill, 93 F.Supp. 2d 376, 398 (S.D.N.Y. 2000).
Plaintiff argues that the breach of contract claim is based on the failure of Defendants to achieve a promised result and therefore, is not duplicative of the legal malpractice claim. (Pl.'s Mem. Law at 16-17.)
In its Complaint, Plaintiff claims that Defendant breached and defaulted under the retainer and professional engagement agreement by, among other things, failing and refusing to provide competent, skillful and zealous professional representation. Specifically, Plaintiff alleges that Defendant Hayes made the following "promises": (i) Hayes "expressed the view" that he could not see, or it was hard to imagine, how Flutie Bros. had anything to do with the allegations in the Adversary Proceeding Complaint, or have any liability or obligation with respect to the same; (ii) Hayes "indicated" that any finding of liability was unlikely; and (iii) Hayes "expressed the view and substantial certainty that he would be able to get Flutie Bros. released from any claims without much difficulty." (Compl. ¶¶ 10, 16.).
Nowhere in the Complaint does Plaintiff allege that Defendant "promised" or expressed any language of absolute certainty that he would be able to get Flutie Bros. released of all liability in the Adversary Proceeding by the Trustee. It appears to the Court that Plaintiff's allegations amount to Hayes' assessment of the case, and not a promise by Hayes that he would get Plaintiff released from the Adversary Proceeding. The first time Plaintiff characterizes Hayes' actions as a "promise to achieve a specific result" is in its Memorandum of Law in response to Defendants' Motion to Dismiss. The Court finds that Hayes did not make such a promise to Plaintiff. Accordingly, Defendants' Motion to Dismiss the breach of contract claim is GRANTED.
If Plaintiff's breach of contract claim were not premised on Defendant Hayes' alleged promise to Plaintiff, it would still be dismissed because the underlying facts and alleged injuries are identical to those claimed in the legal malpractice claim. Therefore, insofar as Plaintiff also alleges a breach of contract claim, not based on an explicit promise by Hayes, but on Hayes' conduct as its lawyer, it is dismissed as redundant of the legal malpractice claim. See Tyborowski v. Cuddeback Onorfry, 279 A.D.2d 763, 765, (3rd Dep't 2001) (dismissing legal malpractice claim and breach of contract and breach of fiduciary claims as arising from the same conduct and alleging no distinct damages);see also Best v. Law Firm of Queller and Fisher, 278 A.D.2d 441, 442 (2d Dep't 2000).
D. Breach of Fiduciary Duty Claims
Under New York law, a breach of fiduciary claim must allege (a) a breach by a fiduciary of obligations to another; (b) that the defendant knowingly induced or participated in the breach; and (c) that the plaintiff suffered damages as a result of the breach." Gupta v. Rubin, 2001 WL 59237, at *7 (S.D.N.Y. Jan. 24, 2001). New York courts have viewed a breach of fiduciary duty against an attorney as essentially a cause of action for legal malpractice. Coveal v. Consumer Home Mortg., Inc., 2005 WL 704835, at *10 (E.D.N.Y. Mar. 29, 2005) (citing Mecca v. Shang, 258 A.D.2d 569, 570 (2d Dep't 1999) (dismissing, among other claims, a claim for fiduciary duty since it "arise[s] from the same facts as [plaintiff's] legal malpractice claim and do[es] not allege distinct damages."). The courts have "never differentiated between the standard of causation requested for a claim of legal malpractice and one for breach of fiduciary duty in the context of attorney liability." Weil, Gotshal Manges, LLP v. Fashion Boutique of Short Hills, Inc., 780 N.Y.S.2d 593, 596-97 (1st Dep't 2004).
The Court has already determined that Plaintiff has failed to allege "but for" causation with respect to its legal malpractice claim. Hence, the claims for breach of fiduciary duty are dismissed for the same insufficiencies present in the legal malpractice claim.
E. Fraud Claims
Plaintiff also alleges fraud against Defendants in Counts Four and Five. Specifically, Plaintiff alleges that Defendant either falsely represented the Trustee's position and receptiveness to Hayes' position that Flutie Bros had nothing to do with the Adversary Proceeding claims, or failed to disclose the true nature of that position, thereby falsely inducing and misleading Plaintiff to continue Defendant's representation and to follow his approach. Plaintiff also claims that Hayes fraudulently concealed his negligence and misrepresentations by ignoring Flutie Bros.' repeated telephone calls, contacts, and requests for information. (Compl. ¶¶ 55, 58.)
Defendants move to dismiss the fraud claims on the ground that the claims do not meet the particularity requirement of Fed.R.Civ.P. 9(b). Plaintiff has not responded to Defendants' 9(b) argument.
According to Fed.R.Civ.P. 9(b), "averments of fraud . . ., [including] the circumstances constituting fraud . . . shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally." To fulfill Rule 9(b)'s particularity requirements, a complaint must specify the time, place, speaker and content of the alleged misrepresentation. DiVittorio v. Equidyne Extractive Indus. Inc., 822 F.2d 1242, 1247 (2d Cir. 1987). While scienter may be averred generally, "plaintiffs are still required to plead the factual basis which gives rise to a strong inference of fraudulent intent." Fischer v. Tynan, No. 90-7587, 1993 WL 213025 at *2 (S.D.N.Y. June 16, 1993) (quoting Wexner v. First Manhattan Co., 902 F.2d 169, 172 (2d Cir. 1990)).
"The elements of actual fraud under New York law are false representation, scienter, materiality, expectation of reliance, justifiable reliance, and damage." Congress Fin. Corp. v. John Morrell Co., 790 F.Supp. 459, 469 (S.D.N.Y. 1992) (citingMorse/Diesel, Inc. v. Fidelity And Deposit Co. of Md., 715 F.Supp. 578, 585 (S.D.N.Y. 1989)); Gupta v. Rubin, 2001 WL 59237, at *7. Claims for fraudulent misrepresentation and fraudulent inducement "must allege, inter alia, that [Plaintiff] reasonably relied on false representations made by [Defendant]."Fax Telecommunicaciones, Inc. v. ATT, 138 F.3d 479, 490 (2d Cir. 1998) (citations omitted).
Other than the conclusory language contained in Counts Four and Five, and the brief statement in the Complaint that Hayes affirmatively misled Plaintiff about the willingness of the Trustee to allow Plaintiff to be dropped from the Adversary Proceeding, (Compl. ¶ 20), there is no other indication in the Complaint that Defendant Hayes' conduct towards Plaintiff was in any way fraudulent or that he intended to defraud Plaintiff by his negligent conduct. No specific allegation is made about Hayes' alleged fraudulent concealment, fraudulent inducement or misrepresentation. Furthermore, none of the facts alleged in the Complaint gives rise to any fraudulent conduct by Hayes. Accordingly, Defendants' Motion to Dismiss the fraud claims for failure to plead with particularity is GRANTED.
F. Judiciary Law § 487
In pleading a violation of Judiciary Law § 487 based upon deceitful conduct by the attorney, Plaintiff must demonstrate that the alleged misconduct was an actual cause of its damages.See Adamson v. Bachner, No. 99 Civ. 3741, 2000 WL 702913, at *2 (S.D.N.Y. May 31, 2000) (citing Cresswell v. Sullivan Cromwell, 771 F. Supp. 580, 587 (S.D.N.Y. 1991). Accordingly, although Defendants did not move to dismiss the Judiciary Law § 487 claim, the Court is compelled to sua sponte dismiss this claim for the same deficiency present in the legal malpractice claim — namely, that Plaintiff has failed to allege that Defendant Hayes' conduct was the actual cause of Plaintiff's damages. See Nunez v. Goord, 172 F. Supp. 2d 417, 433 (S.D.N.Y. 2001) ("the Court has the power to dismiss a complaintsua sponte for failure to state claim") (citing Leonhard v. United States, 633 F.2d 599, 609 n. 11 (2d Cir. 1980)); see also Fitzgerald v. First East Seventh Street Tenants Corp., 221 F.3d 362, 363-64 (2d Cir. 2000) ("District courts are especially likely to be exposed to frivolous actions and, thus, have a great need for inherent authority to dismiss such actions quickly in order to preserve scarce judicial resources.").
G. Leave to Replead
Rule 15(a) of the Federal Rules of Civil Procedure requires that courts freely grant leave to amend "when justice so requires." Fed.R.Civ.P. 15(a). "[I]t is the usual practice upon granting a motion to dismiss to allow leave to replead."Cohen v. Citibank, No. 95 Civ. 4826, 1997 WL 88378, at *2 (S.D.N.Y. Feb. 28, 1997). Absent a showing of undue delay, bad faith or dilatory motive on the part of the movant, undue prejudice to the opposing party, or the futility of the amendment, a plaintiff should be granted leave to replead. See Protter v. Nathan's Famous Sys., Inc., 904 F.Supp. 101, 111 (E.D.N.Y. 1995) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)).
However, if an amendment would be futile, courts can deny leave to amend. See Oneida Indian Nation of N.Y. v. City of Sherrill, 337 F.3d 139, 168 (2d Cir. 2003) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)). "A proposed amendment to a pleading would be futile if it could not withstand a motion to dismiss pursuant to Rule 12(b) (6)." Id. (citing Ricciuti v. N.Y.C. Transit Auth., 941 F.2d 119, 123 (2d Cir. 1991)).
The Court finds that granting Plaintiff leave to replead any of its claims would indeed be futile. It is clear from the Complaint that Plaintiff can prove no set of facts to support its allegation that the conduct of Defendant Hayes was the "but for" causation required for the legal malpractice, breach of fiduciary duty and Judiciary Law § 487 claims. The Court also finds that Plaintiff can neither allege that Defendant Hayes breached an explicit promise made to Plaintiff, nor that Defendant Hayes' conduct, though it may have been negligent, amounted to fraud.
III. CONCLUSION
For the foregoing reasons, Defendants' Motion to Dismiss is GRANTED. Counts One through Six are DISMISSED with prejudice.
The Clerk of the Court is DIRECTED to close this case and remove it from the docket.
SO ORDERED.