Opinion
2001-05873
Argued December 4, 2002.
December 30, 2002.
In an action to recover damages for medical malpractice, nonparty Harvey Wachsman appeals from so much of an order of the Supreme Court, Nassau County (Winslow, J.), dated July 25, 2001, as granted the motion of nonparty Pegalis Erickson, LLC, to have the court allocate the attorney's fee concerning this action between Pegalis Erickson, LLC, and Pegalis, Wachsman Erickson, P.C., granted that branch of the separate motion of the nonparty Pegalis Erickson which was to stay arbitration of the allocation of the attorney's fee concerning this action between Pegalis and Erickson, LLC, and Pegalis, Wachsman Erickson, P.C., and denied his cross application to stay proceedings to allocate the attorney's fee in the Supreme Court on the ground that the issue was subject to arbitration.
Gladstein Isaac, New York, N.Y. (Allen H. Isaac and Brian J. Isaac of counsel), for nonparty appellant.
Kirkpatrick Lockhart, LLP, New York, N.Y. (Gerald A. Novack and Mark Tamoshunas of counsel), for nonparty respondent.
Before: SANDRA J. FEUERSTEIN, J.P., CORNELIUS J. O'BRIEN, DANIEL F. LUCIANO, ROBERT W. SCHMIDT, JJ.
DECISION ORDER
ORDERED that the order is reversed insofar as appealed from, on the law, with costs, the motion to allocate the attorney's fee in the Supreme Court and that branch of the separate motion which was to stay arbitration of the allocation of the attorney's fee concerning this action are denied, and the cross application is granted.
Harvey Wachsman and Steven Pegalis were formerly the sole shareholders in the law firm Pegalis, Wachsman Erickson, P.C. (hereinafter PWE). The shareholders' agreement provided that, in the event the firm dissolved, the division of corporate assets would be determined by an arbitrator. As the result of a court order, PWE was dissolved effective January 15, 2001. Steven Pegalis formed a new law firm with Steven Erickson, called Pegalis Erickson, LLC (hereinafter PE). The plaintiffs in the instant personal injury action were originally clients of PWE, and were represented by PE after PWE dissolved. PE ultimately settled the action, and the settlement included an attorney's fee in the sum of $750,000. PE moved in the action to allocate that fee between it and PWE, and separately moved, inter alia, to stay arbitration of the allocation of that fee. Wachsman opposed and made a cross application to stay proceedings to allocate the attorney's fee in the Supreme Court, arguing that the issue should be arbitrated pursuant to the PWE shareholders' agreement. We agree.
"Absent agreement, both parties are entitled to recover their share of the fees that the corporation earns from pending contingency fee cases" (DelCasino v. Koeppel, 207 A.D.2d 374) . The PWE shareholders' agreement provided for arbitration of a division of the assets upon dissolution, and did not specifically exclude pending contingency fee cases. Thus, the Supreme Court erred in determining that it should allocate the fee between PE and PWE. Contrary to the contention of PE, it was not necessary for Wachsman to prove that PE was the "alter ego" of PWE in order to enforce his right to arbitration. Based on the shareholders' agreement, Pegalis was personally bound to submit to arbitration the issues of the value of the action at bar to PWE at the time of dissolution and the value of his and Wachsman's respective shares of that asset (cf. Grant v. Heit, 263 A.D.2d 388).
In view of our determination, we do not reach the parties' remaining contentions.
FEUERSTEIN, J.P., O'BRIEN, LUCIANO and SCHMIDT, JJ., concur.