Opinion
Index No. 652902/2013
04-05-2019
NAZNEEN MAMOON a/k/a NAZNEEN AHMED, Plaintiff v. DOT NET INC., DOT NET 1 INC., KAMAL UDDIN MRIDHA, LUTFUNNESSA RAHMAN, EAKUB A. KHAN CPA, EAKUB A. KHAN, MOSS & MOSS, LLP, JOHN O.C. MOSS, ESQ., KEY EQUIPMENT FINANCE, INC., NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE, DIRECT CAPITAL CORPORATION, INTERNAL REVENUE SERVICE, XYZ CORPS 1-5, and JOHN DOES 1-2, Defendants
NYSCEF DOC. NO. 347
DECISION AND ORDER
LUCY BILLINGS, J.S.C.:
Plaintiff, the former sole shareholder of defendant Dot Net Inc., seeks to recover damages for fraud, breach of contract, conspiracy, conversion, unjust enrichment, breach of fiduciary duty, malpractice, and negligence, all stemming from her 2011 sale of the corporation to defendant Mridha. Plaintiff alleges that defendants conspired to deceive her and induce her to sell her shares in Dot Net to Mridha without him assuming its debts and breached the sale agreement by failing to deliver its proceeds to plaintiff.
I. UNDISPUTED FACTS
Plaintiff, as the sole shareholder and president of Dot Net, hired defendants Mridha and Rahman to manage the day to day operations of Dot Net. Mridha hired defendant Khan and his firm to provide accounting services to Dot Net, including preparation of corporate tax returns, sales tax returns, and payroll tax returns. In March 2011, plaintiff agreed to sell her shares in Dot Net to Mridha, who retained attorney defendants Moss & Moss, LLP, and John O. C. Moss to represent Mridha in the transaction. On April 11, 2011, plaintiff signed a bill of sale and stock purchase agreement to sell 100% of her shares in Dot Net to Mridha for $75,000, effective on May 1, 2011. Plaintiff claims she never received the $75,000 in proceeds of the sale and has recovered a default judgment against Mridha for that amount. She does not claim that defendant Eakub A. Khan CPA or Eakub A. Khan or the Moss defendants derived any benefit from the sale or that she personally paid any of these defendants for their services.
The Appellate Division already dismissed plaintiff's claims against the Moss defendants for fraud, breach of contract, conspiracy, conversion, unjust enrichment, and breach of fiduciary duty, based on the failure to state a claim. Mamoon v. Dot Net Inc., 135 A.D.3d 656, 657-58 (1st Dep't 2016). The Moss defendants now move for summary judgment dismissing plaintiff's remaining claims of malpractice and negligence against these defendants. The Khan defendants also move for summary judgment dismissing all plaintiff's claims against the Khan defendants based on the failure to state a claim. C.P.L.R. §§ 3211(a)(7), 3212(b).
II. TIMELINESS OF DEFENDANTS' MOTIONS
Plaintiff maintains that both motions for summary judgment were untimely because they were filed October 31, 2016, more than 120 days after she filed the note of issue. Defendants' motions both were timely, however, because their time to file their motions expired Saturday, October 29, 2016, allowing defendants to file their motions on the next business day, Monday, October 31, 2016. N.Y. Gen. Constr. Law. § 25-a.
III. THE KHAN DEFENDANTS' MOTION FOR SUMMARY JUDGMENT
The amended verified complaint alleges that Khan assisted Mridha and Rahman in applying for credit cards and purchasing equipment in Dot Net's name without plaintiff's authorization and in forging her signature as a guarantor on the credit card applications, resulting in debts of over $27,000. The amended complaint further alleges that Khan prepared false tax returns; filed false statements with the New York State Department of Taxation and Finance (NYSDTF) that plaintiff was not an owner of Dot Net, resulting in debts to the United States Internal Revenue Service and NYSDTF; and issued correspondence falsely stating that Mridha and Rahman were Dot Net's sole shareholders. Finally, the amended complaint alleges that Khan conspired with the other defendants to induce plaintiff into selling her shares to Mridha for $75,000 and to conceal Dot Net's debts from her and failed to implement controls to protect her from the other defendants' wrongdoing.
Like plaintiff's claims for fraud, breach of contract, conspiracy, conversion, and unjust enrichment against the Moss defendants, these claims against Khan defendants fail to state a claim. C.P.L.R. § 3211(a)(7). The Appellate Division dismissed these claims against the Moss defendants because her fraud and breach of contract claims duplicate her malpractice claim, her allegations supporting her conversion and unjust enrichment claims were conclusory and incredible on their face, and civil conspiracy is not a cognizable independent claim in New York. Mamoon v. Dot Net Inc., 135 A.D.3d at 658. Since the allegations underlying plaintiff's claims for fraud, breach of contract, conspiracy, conversion, and unjust enrichment against the Khan defendants are identical to the allegations against the Moss defendants that the Appellate Division found deficient, these allegations also fail to state a claim against the Khan defendants. Id. Plaintiff offers no evidence in opposition to summary judgment that remedies those deficiencies. At best, her deposition testimony and affidavit simply reiterate the allegations in her amended complaint.
Because plaintiff's allegations supporting her negligence claim against the Khan defendants concern their actions as accountants for Dot Net, her negligence claim must be evaluated as a claim for professional malpractice. Travelers Indem. Co. v. Zeff Design, 60 A.D.3d 453, 455 (1st Dep't 2009). See In re R.M. Kliment & Frances Halsband, Architects (McKinsey & Co., Inc.), 3 N.Y.3d 538, 542-43 (2004); Boslow Family Ltd. Partnership v. Kaplan & Kaplan, PLLC, 52 A.D.3d 417, 417 (1st Dep't 2008). To sustain a claim for professional malpractice, plaintiff must allege that the Khan defendants departed from accepted standards of accounting practice and that this departure caused her injury. KBL, LLP v. Community Counseling & Mediation Servs., 123 A.D.3d 488, 488 (1st Dep't 2014); Talon Air Servs. LLC v. CMA Design Studio, P.C., 86 A.D.3d 511, 515 (1st Dep't 2011); Travelers Indem. Co. v. Zeff Design, 60 A.D.3d at 455. Since accountants owe no duty to the public at large, "privity," a contractual relationship or similar connection with a mutuality of interest between plaintiff and the Khan defendants, is a necessary predicate for the Khan defendants' liability. Parrott v. Coopers & Lybrand, L.L.P., 95 N.Y.2d 479, 483-84 (2000); State of Cal. Pub. Employees' Retirement Sys. v. Shearman & Sterling, 95 N.Y.2d 427, 434 (2000); Ossining Union Free School Dist. v. Anderson LaRocca Anderson, 73 N.Y.2d 417, 419 (1989); Credit Alliance Corp. v. Arthur Andersen & Co., 65 N.Y.2d 536, 553-54 (1985). Consistent with the flexible concept of privity in different contexts, a party without contractual privity still may sustain a claim for malpractice if she maintained a relationship with the professional that was the functional equivalent of contractual privity. Alphas v. Smith, 147 A.D.3d 557, 558 (1st Dep't 2017); Good Old Days Tavern, Inc. v. Zwirn, 259 A.D.2d 300, 300 (1st Dep't 1999); Town Line Plaza Assocs. v. Contemporary Props., 223 A.D.2d 420, 420 (1st Dep't 1996). See AG Capital Funding Partners, L.P. v. State St. Bank & Trust Co., 5 N.Y.3d 582, 595 (2005); Learning Annex, L.P. v. Blank Rome LLP, 106 A.D.3d 663, 663 (1st Dep't 2013).
Plaintiff testified at her deposition, consistent with her amended complaint, that the Khan defendants were accountants for Dot Net, preparing its tax returns and business forms. Aff. of Richard H. Rubin Ex. C, at 132, 151, Ex. H ¶ 69. Plaintiff nowhere alleges that she retained the Khan defendants for any services on her own behalf. Since plaintiff individually maintained no contractual relationship with the Khan defendants, she must have maintained a relationship functionally equivalent to contractual privity to sustain her claim for malpractice. Parrott v. Coopers & Lybrand, L.L.P., 95 N.Y.2d at 483-84; State of Cal. Pub. Employees' Retirement Sys. v. Shearman & Sterling, 95 N.Y.2d at 434; Ossining Union Free School Dist. v. Anderson LaRocca Anderson, 73 N.Y.2d at 419; Credit All. Corp. v. Arthur Andersen & Co., 65 N.Y.2d at 553-54.
Plaintiff demonstrates a direct professional relationship with a mutuality of interest, near contractual privity, with the Khan defendants. She testified, and they do not dispute, that she was the president and sole shareholder of the Khan defendants' client, Dot Net, so that their work for Dot Net directly affected her livelihood. She further testified, continually referring to her amended complaint, that this effect was injurious, as their work rendered her personally liable for credit card, contractual, and tax debts accrued by Dot Net. Rubin Aff. Ex. C, at 132, 149, Ex. H ¶¶ 17-19, 69; Alphas v. Smith, 147 A.D.3d at 558; Good Old Days Tavern, Inc. v. Zwirn, 259 A.D.2d at 300. Khan's deposition testimony that, knowing plaintiff was the sole shareholder of Dot Net, he met and advised her on tax issues relating to the corporation on two separate occasions further demonstrates a direct professional relationship between plaintiff and the Khan defendants. Rubin Aff. Ex. A, at 13-16.
The Khan defendants insist, however, that, even if they maintained a direct relationship with plaintiff, she still fails to state a claim for malpractice. Plaintiff claims the Khan defendants committed malpractice by filing false tax returns, but she never specifies which tax returns were false and how they were false. Herrmann v. CohnReznick LLP, 155 A.D.3d 419, 420 (1st Dep't 2017); Leigh Mgt. Assoc. v. Weinstein, 251 A.D.2d 225, 226 (1st Dep't 1998). She does allege that the Khan defendants prepared a false DTF-95 form, but does not allege how this form caused any injury or even that she incurred any injury as a result of any false document. Even if the amended complaint stated a claim on this basis, Khan's affidavit in support of his motion attests that neither he nor his firm prepared the DTF-95 form that plaintiff alleges was false. Aff. of Eakub Khan ¶ 15. His affidavit is supported by the DTF-95 form itself, which is not signed by the Khan defendants and does not refer to them in any way. Rubin Aff. Ex. N. Plaintiff presents no evidence in opposition demonstrating that the Khan defendants prepared, signed, or filed the DTF-95 form.
Nor does plaintiff state a claim for malpractice based on her allegations that the Khan defendants failed to protect her from the other defendants' wrongdoing and misrepresented material facts concerning her ownership of the corporation during the sale of her shares. These claims do not amount to malpractice because she nowhere explains how the Khan defendants' failure to protect her departed from accepted standards of accounting practice, what facts they misrepresented, and how such a misrepresentation, given that she knew that she owned the corporation before she sold it, proximately caused any injury. Plaintiff also alleges that the Khan defendants issued correspondence falsely stating that Mridha and Rahman were the sole shareholders of Dot Net, but again does not allege how this correspondence caused any injury or even that she incurred any injury as a result of any false document. Mid-Hudson Val. Fed. Credit Union v. Quartararo & Lois, PLLC, 31 N.Y.3d 1090, 1091 (2018); Heritage Partners LLC v. Stroock & Stroock & Lavan LLP, 155 A.D.3d 561, 561 (1st Dep't 2017); Freeman v. Brecher, 155 A.D.3d 453, 453 (1st Dep't 2017); Brion v. Moreira, 138 A.D.3d 580, 581 (1st Dep't 2016).
Khan testified at his deposition that he actually drafted this correspondence on May 28, 2011, but it was misdated March 28, 2011. Rubin Aff. Ex. A, at 34-36. Since plaintiff transferred all her shares on May 1, 2011, Khan's statement that Mridha and Rahman were the sole shareholders of Dot Net was not false on May 28, 2011. Rubin Aff. Ex. D. Absent any contrary evidence from plaintiff in opposition, the Khan defendants therefore are entitled to summary judgment dismissing her claim for malpractice on these bases.
The amended complaint's allegations that the Khan defendants assisted Mridha and Rahman in obtaining credit cards, lines of credit, and personal guaranties in plaintiff's name, accruing over $27,000 in debts in her name, state a claim for malpractice if supported by any evidence. Neither plaintiff's testimony nor any other evidence supports these conclusory allegations, however, by identifying any application or contract naming her as an obligor, let alone bearing her signature, forged or otherwise. Khan attests, on the other hand, that neither he nor his firm assisted the other defendants to obtain credit cards or lines of credit or forge plaintiff's signature on a lease with Key Equipment Finance, Inc. Khan Aff. ¶¶ 13-14. Since plaintiff presents no contrary evidence in opposition, nor points to any other contracts on which defendants forged or even induced her signature, the Khan defendants are entitled to summary judgment dismissing her malpractice claim based on Dot Net's debts. Kolodin v. Valenti, 147 A.D.3d 459, 460 (1st Dep't 2017); Wo Yee Hing Realty, Corp. v. Stern, 99 A.D.3d 58, 65 (1st Dep't 2012); Talon Air Servs. LLC v. CMA Design Studio. P.C., 86 A.D.3d at 515; Santini v. Alexander Grant & Co., 272 A.D.2d 271, 271 (1st Dep't 2000).
IV. THE MOSS DEFENDANTS' MOTION FOR SUMMARY JUDGMENT
Plaintiff must establish either an attorney-client relationship or the functional equivalent of contractual privity to state a claim for legal malpractice against the Moss defendants. AG Capital Funding Partners, L.P. v. State St. Bank & Trust Co., 5 N.Y.3d at 595; Leggiadro, Ltd. v. Winston & Strawn, LLP, 119 A.D.3d 442, 442 (1st Dep't 2014); Cusack v. Greenberg Traurig, LLP, 109 A.D.3d 747, 747-48 (1st Dep't 2013); Learning Annex, L.P. v. Blank Rome LLP, 106 A.D.3d at 663. The amended complaint alleges that the Moss defendants were her attorneys based on a representation to her of that fact, but does not specify that the Moss defendants made that representation. Aff. of John Moss Ex. 8, Am. V. Compl. ¶¶ 20, 51. Plaintiff's deposition testimony clarified that defendants Mridha and Rahman represented to plaintiff that the Moss defendants were her attorneys. Although she believed that representation, she admitted that she was never in direct contact with the Moss defendants before signing the asset transfer documents, did not ask the Moss defendants to serve as her attorneys, did not sign or receive any retainer agreement, and never paid the Moss defendants for any services. Id. Ex. 5, at 33, 79, 96-99, 106. Defendant John Moss' affidavit in support of the Moss defendants' motion attests that his firm never provided any legal advice or services to plaintiff or served as her attorney in any capacity. Id. ¶ 4.
Since plaintiff's subjective belief that the Moss defendants were her attorneys did not create an attorney-client relationship or even a relationship near privity, Segal v. Five Star Electric Corp., 165 A.D.3d 613, 613 (1st Dep't 2018); Gregor v. Rossi, 120 A.D.3d 447, 448 (1st Dep't 2014); Leff v. Fulbright & Jaworski, L.L.P., 78 A.D.3d 531, 532 (1st Dep't 2010), the Moss defendants have established that there was no relationship between plaintiff and them as required to sustain a claim for malpractice against them. AG Capital Funding Partners, L.P. v. State St. Bank & Trust Co., 5 N.Y.3d at 595; Leggiadro, Ltd. v. Winston & Strawn, LLP, 119 A.D.3d at 442; Cusack v. Greenberg Traurig, LLP, 109 A.D.3d at 747-48; Learning Annex, L.P. v. Blank Rome LLP, 106 A.D.3d at 663. Plaintiff's affidavit in opposition now attests that the Moss defendants represented to her that they were her attorneys, Aff. of Nazneen Mamoon at 1, and specifically that Moss assured her at the signing of the transfer documents that she did not need her husband present because the Moss defendants were her attorneys. Id. at 2.
Plaintiff testified at her deposition, however, that she believed the Moss defendants were her attorneys because Mridha and Rahman so advised her and that she never engaged in any conversation with Moss about his firm providing any advice or services to her or asked Moss or his firm to be her attorney. Moss Aff. Ex. 5, at 79, 96-97. Plaintiff also recalled her exchange with Moss at the signing differently at her deposition, where she testified that she asked to allow her husband to read the documents, but Moss informed her that he did not have time to wait. Id. at 85. Plaintiff's affidavit thus is tailored to avoid the consequences of her previous testimony and must be disregarded. Vazquez v. Takara Condominium, 145 A.D.3d 627, 627 (1st Dep't 2016); Perine Intl. Inc. v. Bedford Clothiers, Inc., 143 A.D.3d 491, 492 (1st Dep't 2016); Villafane v. Indus. Constr. Mgt., Ltd., 137 A.D.3d 526, 527 (1st Dep't 2016); In re Schuman, 132 A.D.3d 551, 552 (1st Dep't 2015).
Plaintiff presents no other evidence of an attorney-client relationship or the functional equivalent of contractual privity between her and the Moss defendants, requiring dismissal of her malpractice claim. Nor does she claim any other duty of care to sustain her negligence claim, requiring its dismissal as well. Benzemann v. Citibank N.A., 149 A.D.3d 586, 586 (1st Dep't 2017); Art Capital Group, LLC v. Neuhaus, 70 A.D.3d 605, 607 (1st Dep't 2010). See Oddo v. Queens Vil. Comm. for Mental Health for Jamaica Community Adolescent Program, Inc., 28 N.Y.3d 731, 738 (2017).
V. CONCLUSION
For all the reasons explained above, the court grants the motion by defendants Eakub A. Khan CPA and Khan and the motion by defendants Moss & Moss, LLP, and Moss for summary judgment to dismissing the complaint against these four defendants. C.P.L.R. §§ 3211(a)(7), 3212(b). This decision constitutes the court's order and judgment. DATED: April 5, 2019
/s/_________
LUCY BILLINGS, J.S.C.