Opinion
602145/07.
June 12, 2009.
DECISION/ORDER
MEMORANDUM DECISION
In this action to recover legal fees, plaintiff Morelli Gold, LLP ("plaintiff") moves pursuant to CPLR § 3211(a)(1), (5) and (7) to dismiss the counterclaims in the Verified Amended Answer ("Amended Answer") of defendant Paul H. Altman ("defendant"). By separate motions, defendant moves pursuant to CPLR § 3025(b) for leave to serve a Second Amended Answer (the "Proposed Answer"), and to renew his prior motion to dismiss the Complaint and the resulting Court order of June 30, 2008. In response, plaintiff cross moves for sanctions.
Upon renewal, defendant requests that the Court reverse its June 2008 decision, dismiss plaintiff's claims on the grounds of arbitration and award, collateral estoppel, res judicata, and lack of jurisdiction, reinstate defendant's special proceeding to confirm the arbitrator's award (discussed infra, p. 2), sanction plaintiff for commencing this action, and permit defendant to proceed with his counterclaims. Defendant also sought in the alternative, leave to amend his pending motion to serve the Proposed Answer to include a defense and counterclaim based on pre-emption by the Federal Arbitration Act ("FAA"). However, in his reply and opposition to plaintiff's cross-motion, defendant withdrew the branch of his motion that "advances arguments and remedies related to the FAA."
Plaintiff's motion, bearing sequence #003 and defendant's motions, bearing sequence #004 and #005, are consolidated for joint disposition herein.
Of the many counterclaims alleged in defendant's Proposed Answer, defendant retained his counterclaims for legal malpractice, fraud, breach of fiduciary duty and added two additional counterclaims for breach of the plain language requirement of 22 NYCRR § 1400.3 and breach of Judiciary Law § 427. Defendant's second and third counterclaims for a refund, based on the allegation that there was no retainer agreement and that plaintiff was terminated "for cause," alleged in the Amended Answer, respectively, were substituted by the new counterclaims, Defendant also abandoned his claim for punitive damages previously alleged in his fourth and fifth counterclaim for fraud and breach of fiduciary duty, but retained the punitive damages claim in the legal malpractice counterclaim.
Factual Background
Defendant contends that he has lived in Florida since 2000, while his son, Jeremy, continues to reside with his mother, Ana Billini ("Ms. Billini"), in New York. From April 2002 through February 2006, Richard Gold, a partner of plaintiff ("Mr. Gold"), performed legal services for defendant pursuant to a "Representation Agreement" in connection with matters relating to defendant's son and Ms. Billini (the "underlying action"). At the conclusion of the plaintiff's representation, defendant refused to pay the balance of the plaintiff's legal fees. Defendant then submitted the fee dispute to the Fee Dispute Resolution Program. After a hearing, the arbitrators determined that plaintiff was entitled to a portion of the legal fees claimed, and in light of the payments previously paid by defendant, directed plaintiff to refund defendant $4,943.09 (the "Arbitration Award"). Unsatisfied with the Arbitration Award, plaintiff commenced the instant action for a trial de novo.
The Courts created a mandatory Fee Dispute Resolution Program under Part 137 of Title 22 of the Official Compilation of Codes, Rules and Regulations of the State of New York ("Part 137") (eff. January 1, 2002).
Thereafter, defendant moved to dismiss plaintiff's complaint on the grounds of, inter alia, arbitration and award, collateral estoppel and res judicata pursuant to CPLR § 3211(a)(5) based on the Arbitration Award, and sought sanctions and costs against the plaintiff. By Order dated July 1, 2008, this Court denied defendant's motion in its entirety, finding that plaintiff was within its rights to proceed with a trial de novo. Defendant's Motion to Renew and Amend His Answer
In support of renewal, defendant argues that the following new facts warrant a change in the Court's prior determination: (1) the guidelines, including "Form 137-9" for waiving de novo review were recently reworded and support defendant's claim that the parties waived such review; and (2) the "Model Form UCS 137-14," upon which this Court relied, was not "promulgated" by the Attorney-Client Fee Dispute Resolution Program's website, not publicly available at the time the parties signed the binding arbitration clause, and not published as New York State law.
Since Form 137-9 was not publicly available or part of New York State law, and defendant failed to inform plaintiff that the absence of the required form would render the agreed-upon arbitration "non-binding," defendant is equitably estopped from benefitting from relying on such Form. Further, there is reasonable justification for defendant's failure to present such facts in the prior motion. Defendant could not have known about the newly amended Form 137-9 prior to its promulgation in February 2009, as it was not part of the Arbitration program's rules or handouts, nor was it published as New York State law. Plaintiff did not provide defendant with a copy of Form 137-9 until 2007, five years after the Retainer Agreement was signed. This form was first mentioned in plaintiff's Sur-Reply, to which defendant was not permitted to respond.
In support of the Proposed Answer, defendant argues that at this stage of the proceedings, before discovery, plaintiff will not sustain prejudice or surprise as a result of the Proposed Answer. Defendant further argues that despite the new counterclaims in the Proposed Answer, no "essentially new facts" are introduced; rather substantially more detail has been provided regarding the facts alleged in defendant's Amended Answer. Defendant contends that since pleadings are to be liberally construed, and his counterclaims are sufficiently pleaded and have merit, leave to amend should "be freely given," pursuant to CPLR § 3025(b).
Plaintiff's Opposition and Cross-Motion for Sanctions
Plaintiff opposes renewal, arguing that the change in the Resolution Program guidelines did not result in a change of law or fact, but was merely a new form with a different notice of existing law regarding each party's rights to a trial de novo. Moreover, no change has been made to Section 137.2(c) of the Rules of the Chief Administrator of the Courts, which provides that consents by the parties to waive their rights to a trial de novo shall be in writing in a form prescribed by the Board of Governors. Further, the fact that the Form was not posted on the Internet is irrelevant; the parties never agreed to waive their respective rights to a trial de novo, nor executed the required form to effectuate consent waiver of the same. Defendant could have contacted the Board of Governors in 2002 if he truly believed the parties were waiving their right to trial de novo. Further, defendant's proposed counterclaims fail to state sufficient facts and thus, leave to amend must be denied.
Plaintiff argues that defendant proffers no argument in support of sanctions. Instead, plaintiff argues, it is owed attorneys' fees and costs for responding to defendant's frivolous motion practice. Plaintiff points out that the Court previously denied defendant's two motions, defendant filed two appeals that he has yet to perfect, and defendant's motion fails to present any new facts to alter the Court's previous decisions, Plaintiff's counsel gave defendant an opportunity to withdraw his motion, to no avail.
As to the Proposed Answer, plaintiff first argues that defendant's proposed counterclaim for attorney malpractice fails to state a cause of action. Of the elements necessary to state such a claim, defendant failed to set forth how plaintiff proximately caused any damages to defendant. Instead, defendant states in a conclusory manner that plaintiff's "errors" were the proximate cause of the damages suffered by defendant, which is patently insufficient.
Plaintiff also argues that defendant's claim that he suffered damages in the form of his payment of $34,943 in legal fees is improper. Defendant's counterclaim fails to sufficiently allege that plaintiff's malicious or tortious conduct proximately caused him to incur legal fees. And, the legal fees sought are not damages proximately caused by defendant's alleged conduct. Also, defendant's allegation that his relationship with his son was "irreparably damaged, causing defendant great emotional and psychological distress" is speculative, and not ascertainable. Defendant failed to allege any facts indicating that plaintiff's representation proximately caused these damages. There are no allegations that plaintiff had any communication with defendant's son, or allegations regarding the extent of defendant's relationship with his son prior and subsequent to plaintiff's representation. Bare conclusions are insufficient to sustain a claim for damages for legal malpractice, plaintiff contends.
Nor has defendant presented any facts to support his claim that plaintiff's representation led to a child support order in excess of what defendant believes he is required to pay. Defendant does not mention the date and amount of his current child support order, or any basis of what he believes he should pay in child support. The Proposed Answer merely concludes that the additional legal fees were spent by defendant because of plaintiff, which is insufficient. Further, defendant does not present any facts indicating that he incurred and continues to incur "additional legal costs to attempt to rectify" the alleged malpractice, the amounts therefor, or what plaintiff did to cause the expenditure of additional legal fees. In any event, defendant's conclusory allegation of damages is insufficient to sustain a claim for legal malpractice.
Plaintiff also contends that punitive damages are unwarranted. Defendant has not demonstrated any "moral turpitude and wanton dishonesty" on behalf of plaintiff, or that the alleged wrong was directed at the public generally. Further, this Court has already agreed with plaintiff and its actions by permitting the parties to seek de novo review of their fee dispute. Second, plaintiff argues that the second proposed counterclaim alleging that plaintiff violated a written retainer agreement fails to state a cause of action and is barred by res judicata pursuant to CPLR § 3211 (a)(5). Here, defendant's allegation that plaintiff provided him a "trick retainer," which did not satisfy the plain-language requirement of 22 NYCRR § 1400.3, was conclusively resolved by the Court in an earlier motion with regard to the parties' right to seek a trial de novo. As to defendant's contention that the retainer agreement regarding arbitration and the issues of visitation and support was not drafted in plain language, such issues have already been addressed, and defendant's application was previously denied.
Motion Sequence #001.
Third, plaintiff argues that defendant's third counterclaim alleging that plaintiff violated Judiciary Law ("JL") § 487 fails to state a cause of action. Plaintiff argues that an alleged violation of JL § 487 is, in essence, a claim grounded in fraud upon a court or a party. Plaintiff argues, that the elements of deceit or fraud must be both pleaded and proved, and defendant failed to set forth any facts to establish that the court or any other party relied upon a material representation purportedly made by plaintiff on behalf of defendant. Further, defendant cannot demonstrate the requisite injury proximately resulting from any fraudulent conduct of plaintiff.
Fourth, plaintiff argues that defendant's fourth counterclaim alleging that plaintiff committed fraud is insufficiently pled, in that there are no allegations that a material fact was misrepresented, no allegations of falsity, no facts alleged in support of scienter and deception, and certainly none of these elements are pled with the required specificity. Further, the allegations regarding defendant's fraud claim, i.e., the misrepresentation of plaintiff s understanding of family law and of the true meaning of the retainer, arise from the same facts giving rise to the malpractice claim, and courts routinely dismiss fraud claims that are duplicative of a malpractice claim. In defendant's malpractice and fraud claim, defendant provides only conclusory comments regarding plaintiff's negligence, with no discussion of fraud. Plaintiff further argues that because this Court conclusively resolved the issue of whether plaintiff's de novo action was proper, defendant's attempt to relitigate this claim under the guise of fraud and breach of fiduciary duty is barred by res judicata pursuant to CPLR § 3211 (a)(5). The Court previously held that the affirmative defenses of arbitration and award (and by extension, collateral estoppel and res judicata) are not available to defendant so as to bar plaintiff s complaint from adjudication. Further, because issues regarding the retainer agreement were resolved and the Court concluded that plaintiff properly initiated this action, defendant cannot seek a contradictory ruling that plaintiff's request for de novo review constitutes fraud and breach of fiduciary duty. Plaintiff argues that defendant cannot bring different claims from a transaction where the rights and obligations of the parties have been decided. Thus, any new claims contending that such actions were improper, such as a fraud claim, are barred by res judicata. Fifth, plaintiff argues that defendant's fifth proposed counterclaim alleging breach of fiduciary duty is conclusory and insufficiently plead, in that the counterclaim merely recites the same facts that purportedly support the malpractice and fraud claims, and does not set forth how plaintiff proximately caused any damages to defendant. Defendant's claim that the attorney/client relationship was the proximate cause of the damages suffered by defendant, without more, is insufficient to support a breach of fiduciary duty claim. Further, defendant's claim that plaintiff misrepresented the true meaning of the Representation Agreement and his knowledge of family law matters arises from the same set of facts as the claim for malpractice and fraud. Thus, the Court should dismiss the breach of fiduciary duty claim as duplicative. Finally, defendant's breach of fiduciary duty claim based on the allegation that plaintiff acted inappropriately in exercising its right to a trial de novo is barred by doctrine of res judicata. Defendant's Reply and Opposition to Cross-Motion for Sanctions
Defendant argues that Courts consistently afford pro se litigants "special latitude" when considering pleadings drafted by them.
As to his malpractice counterclaim, defendant contends that he has established how plaintiff's "many errors" were the proximate cause of his damages. Defendant argues that, "simply put, Mr. Gold was not competent and churned my account." Defendant further alleges that Mr. Gold's advice to defendant varied between "incompetent and malicious." Defendant claims that plaintiff "never prevailed on any of the Family Court actions he represented me in (with one exception, described in [Proposed Answer, ¶ 25], where a visitation Judge ordered my adversary to withdraw a complaint)." Defendant further alleges that Mr. Gold engaged in "wasted work" and caused defendant to suffer "agony" while Mr. Gold "ignored the progressive alienation of [defendant's] son." The issue of proximate cause is for a jury and a malpractice expert to decide, defendant contends. Defendant further argues that he has sufficiently demonstrated that plaintiff's actions were the proximate cause of the damage to defendant's relationship with his son. Citing the Proposed Answer, defendant also maintains that he has sufficiently demonstrated plaintiff's moral turpitude and wanton dishonesty.
Second, defendant argues that res judicata does not bar his second proposed counterclaim that plaintiff violated the plain language requirement of 22 NYCRR § 1400.3. This Court has solely ruled that plaintiff could sue de novo, but has not yet ruled on the public policy issue of whether a consumer can be "stripped" of all recourse as a victim of a "trick retainer agreement." Third, defendant contends that plaintiff's challenge to his third counterclaim under the JL § 487 is disingenuous, and that plaintiff improperly cites to a case which makes no mention of JL § 487. Citing his Proposed Answer, ¶¶ 44-46, defendant further maintains that his Judiciary Law counterclaim contains all of the elements for fraud.
Fourth, defendant contends that plaintiff's arguments regarding his fourth and fifth proposed counterclaims for fraud and breach of fiduciary duty, respectively, lack merit. The fourth and fifth proposed counterclaims focus on the Representation Agreement, which falsely promised "binding" arbitration, and the resultant injury to defendant. As defendant did not make such allegations in his malpractice claim, the proposed counterclaims are not duplicative.
Defendant argues that based on the above, his motion has merit, and the cross-motion for sanctions against him should be denied. Analysis Leave to Renew
The motion to renew, when properly made, posits newly discovered facts that were not previously available or a sufficient explanation is made why they could not have been offered to the Court originally ( see discussion in Alpert v Wolf, 194 Misc 2d 126, 133; D. Siegel New York Practice § 254 [3rd ed. 1999]). A motion to renew, "is intended to draw the court's attention to new or additional facts that, although in existence at the time of the original motion, were unknown to the party seeking renewal and therefore not brought to the court's attention" ( William P. Pahl Equipment Corp. v Kassis, 182 AD2d 22 [1st Dept 1992]). In light of defendant's "new" factual allegations concerning the reworded Form 137-9 and failure of the Attorney-Client Fee Dispute Resolution Program to make publically available the Model Form UCS 137-14, the Court grants renewal. However, upon renewal, the Court adheres to its earlier determination.
The guidelines, including "Form 137-9"for waiving de novo review were recently Reworded. Form 137-9, titled "Notice of Arbitration Award," now includes the following phrase:
"NOTE: Trial de novo is not available to parties who have previously waived this right. See 22 NYCRR 137.2(c) . 137.8(b) and Standards and Guidelines Section 6(B)(2) and Section 12(C)." (Emphasis added).
According to defendant, this amendment allows for a waiver of trial de novo pursuant to the sections noted therein, and does not refer to any "written waiver form" or Model Form UCS 137-14, or "express waiver language." Consequently, defendant argues, the Court must consider that Form 137-9 was amended to indicate that it is indeed possible to waive de novo review without using any "written waiver form" or Model Form UCS 137-14, or "express waiver language.'" Defendant points out that he previously argued that the requirements for a valid waiver were governed by Standards and Guidelines Section 6(B)(2), and there was no Part 137 requirement of a "pre-written" form or "express waiver wording."
However, the amended form cites to 22 NYCRR 137.2(c), 137.8(b) and Standards and Guidelines Section 6(B)(2). Rule 22 NYCRR 137.2(c) provides:
The attorney and client may consent in advance to arbitration pursuant to this Part that is final and binding upon the parties and not subject to de novo review. Such consent shall be in writing in a form prescribed by the board of governors.
At the time the parties executed the Representation Agreement, the written waiver form prescribed by the Board of Governors required both parties to acknowledge that:
[T]hey agree to be bound by the decision of the arbitrator(s) and agree to waive their rights to reject the arbitrator(s) award by commencing an action on the merits (trial de novo) in a court of law within 30 days after the arbitrator(s) decision has been mailed . . . Attorney and Client understand that they are not required to agree to waive their right to seek a trial de novo under Part 137. Model Form UCS 137-14 (11/01). See also. Borgus v Marianetti, 7 Misc 3d 1003 [NY City Ct 2005]).
Although the Notice of Arbitration Award was amended, the form prescribed by the board of governors still requires that the parties "agree to be bound by the decision of the arbitrator(s) and agree to waive their rights to reject the arbitrator(s) award by commencing an action on the merits (trial de novo) in a court of law within 30 days after the arbitrator(s) decision has been mailed" (emphasis added). Rule 22 NYCRR 137.8(b) provides that the Mediator "hereby agree to serve as a mediator pursuant to Part 137 of the Rules of the Chief Administrator and I swear or affirm that I will mediate all matters coming before me faithfully and fairly." Standards and Guidelines Section 6(B)(2) provides:
Under section 137.2(c), the attorney and client may consent in advance to submit to arbitration that is final and binding and not subject to a trial de novo. To be valid on the part of the client, such consent must be knowing and informed and obtained in the manner set forth in section 6(B)(1) of these Standards and Guidelines, except that the retainer agreement or other writing shall also state that the client understands that he or she is waiving the right to reject an arbitration award and subsequently commence a trial de novo in court.
Standards and Guidelines Section 12© provides: "Any party who fails to participate in the arbitration hearing shall not be entitled to a trial de novo absent good cause for such failure to participate."
That the Standards and Guidelines prescribe the manner in which the client's consent to final and binding arbitration must be obtained in order to be valid on the part of the client, the absence of any reference to the attorney does not obviate the requirement that a waiver of a trial de novo contain an express agreement that the parties to "waive their rights to reject the arbitrator(s) award by commencing an action on the merits (trial de novo)," pursuant to 22 NYCRR 137.2(c).
Therefore, since the subject Retainer Agreement did not conform with the written waiver form prescribed by the Board of Governors, the Court adheres to its prior determination that the parties did not waive their right to de novo review.
Further, defendant's claim that "Model Form UCS 137-14," upon which this Court relied, was not "promulgated" by the Attorney-Client Fee Dispute Resolution Program's website, not publicly available at the time the parties signed the binding arbitration clause, and not published as New York State law is insufficient to warrant a different result. Even accepting as true defendant's claim that the said form was not made available to or made accessible through any website of the Attorney-Client Fee Dispute Resolution Program, the Form existed and was effective as of November 2001, prior to defendant's execution of the Retainer Agreement on April 24, 2002.
Thus, upon renewal, the branch of defendant's application for an order dismissing the Complaint, vacating the Court's June 30, 2008 order on the grounds of arbitration and award. collateral estoppel, res judicata, and lack of jurisdiction, reinstating defendant's special proceeding to confirm the arbitrator's award, and sanctioning plaintiff is denied.
Motion to Dismiss
The standard on a motion to dismiss a pleading for failure to state a cause of action is not whether the party has artfully drafted the pleading, but whether deeming the pleading to allege whatever can be reasonably implied from its statements, a cause of action can be sustained ( see Stendig, Inc. v Thom Rock Realty Co., 163 AD2d 46 [1st Dept 1990]; Leviton Manufacturing Co., Inc. v Blumberg, 242 AD2d 205, 660 NYS2d 726 [1st Dept 1997]). Thus, a pleading "should not be dismissed on a pleading motion so long as, when the plaintiff's allegations are given the benefit of every possible inference, a cause of action exists" ( Rosen v Raum, 164 AD2d 809 [1st Dept 1990] citing R.H. Sanbar Projects, Inc. v Gruzen Partnership, 148 AD2d 316, 318 [1st Dept 1989]). The material allegations of the pleading must be deemed to be true, and the proper inquiry is whether a cause of action exists, not whether it has been properly stated ( Ippolito v Lennon, 150 AD2d 300, 302 [1st Dept 1989]). Moreover, a pro se pleading should be construed liberally in favor of the pleader ( see United States Fidelity Guaranty Co. v Pressler, 551 NYS2d 921 [1st Dept 1990]).
Leave to Amend Answer
It is well settled that leave to amend an answer pursuant to CPLR § 3025(b) should be freely granted provided there is no prejudice to the nonmoving party ( Crimmins Contr. Co. v City of New York, 74 NY2d 166; McCaskey, Davies Assocs v New York City Health Hosps. Corp., 59 NY2d 755; Lambert v Williams, 218 AD2d 618 [1st Dept 1995]). Although leave to amend should be freely granted, the movant must make some evidentiary showing that the proposed amendment has merit, and a proposed pleading that fails to state a cause of action or is plainly lacking in merit will not be permitted ( Hynes v Start Elevator, Inc., 2 AD3d 178 [1st Dept 2003]; Tishman Constr. Corp. v City of New York, 280 AD2d 374 [1st Dept 2001]; Bencivenga Co. v Phyfe, 210 AD2d 22 [1st Dept 1994]; Bankers Trust Co. v Cusumano, 177 AD2d 450 [1st Dept 1991], lv dismissed 81 NY2d 1067).
The Court proceeds to address whether plaintiff's motion to dismiss is warranted in light of defendant's amplified counterclaims for legal malpractice/punitive damages, fraud, breach of fiduciary duty and breach of the plain language requirement of 22 NYCRR § 1400.3 and breach of JL § 427.
Legal Malpractice
In order to state a claim for legal malpractice, defendant must allege (1) that plaintiff breached his duty to exercise the degree of care, skill and diligence commonly possessed by a member of the legal profession, and (2) actual damages were proximately caused by the breach ( Barbara King Family Trust v Voluto Ventures, 46 AD3d 423 [1st Dept 2007]; see Gonzalez v Ellenberg, 5 Misc 3d 1023 [Sup Ct New York County 2004]). To establish proximate cause and actual damages, defendant "must meet the 'case within a case' requirement, demonstrating that 'but for' the attorney's conduct the client would have prevailed in the underlying matter or would not have sustained any ascertainable damages had defendants exercised due care" ( Levine v Lacher Lovell-Taylor, 256 AD2d 147 [1st Dept 1998]; Rubinberg v Walker, 252 AD2d 466 [1st Dept 1998]; see Rudolf v Shayne, Dachs, Stanisci, Corker Sauer, 8 NY3d 438 [plaintiff must show that he or she would have prevailed in the underlying action or would not have incurred any damages, but for the lawyer's negligence]; see also Bazinet v Kluge, 14 AD3d 324 [1st Dept 2005]). Damages may include "litigation expenses incurred in an attempt to avoid, minimize, or reduce the damage caused by the attorney's wrongful conduct" ( Rudolf v Shayne, Dachs, Stanisci, Corker Sauer).
It is undisputed that Mr, Gold, a partner of plaintiff, represented defendant in a domestic relations matter from April 2002 until February 2006, thereby giving rise to a duty on behalf of the plaintiff to exercise the degree of care, skill and diligence commonly possessed by a member of the legal profession.
Defendant also sufficiently alleges that plaintiff breached its duty to defendant. The Proposed Answer alleges that plaintiff lacked experience and knowledge in Family Court law and failed to associate with an attorney or attorneys with the requisite knowledge. The Proposed Answer also alleges that plaintiff did not represent defendant zealously and competently.
Defendant contends that in October 2002, Mr. Gold drafted a visitation/support agreement for defendant (the "Agreement"), which was entered into after negotiation.
However, defendant contends that "Mr. Gold incurred large amounts of legal fees over the next two years in order to persuade [Ms. Billini] and her attorney to cooperate" and comply with the Agreement. Defendant alleges that Mr. Gold told him that a contempt petition against Ms. Billini for impeding the visitation, was unavailable. However, at no time during the four years of representation did Mr. Gold inform defendant that he had the right, beginning in 2002, to fill out a simple form and file a petition in the Family Court of New York County to modify the visitation procedures of the Agreement. Mr. Gold allegedly improperly advised defendant that Family Court Judge Sturm only has the authority to "enforce contracts," not "rewrite" them. Mr. Gold was unaware that Family Court judges routinely modify stipulations and orders based on all kinds of changed circumstances. In fact, defendant contends, there were serious changed circumstances, in that Ms. Billini failed to cooperate with scheduling visitation and was engaged in alienating defendant's son from defendant, of which defendant made Mr. Gold aware.
When Ms. Billini sought to modify the visitation schedule and get an upward modification of child support in October 2004, on November 29, 2004, Mr. Gold "finally filed a counterclaim seeking sanctions" against Ms. Billini for maliciously interfering with defendant's relationship with Jeremy and for impeding almost every scheduled visitation since the Agreement was entered into. Mr. Gold thought that this constituted a "contempt motion," and often referred to it as such. Apparently, Mr. Gold was ignorant regarding the difference between a "contempt motion" and a "motion for sanctions," defendant argues.
Defendant further alleges that Mr. Gold then misfiled defendant's contempt petition in that it was never docketed to be heard as a petition, but rather was filed only as an "Affidavit, Answer and Cross-Petition/Counterclaims" in response to Ms. Billini's petition. Said Affidavit should have been filed as a "Violation Petition" or "Motion for Sanctions." Mr. Gold wrote only one petition addressing both visitation and support issues, and submitted copies to both courts, which is improper in Family Court, because visitation cases are handled by judges, and child support cases are handled by magistrates. Mr. Gold did not realize that he had misfiled defendant's petition until several hearings later, during the April 14, 2005 hearing in front of Judge Sturm.
Defendant alleges that it was not until the April 14, 2005 hearing that Mr. Gold learned for the first time that he had misfiled defendant's contempt petition. When Ms. Billini's petition was "ordered withdrawn" by Judge Sturm, defendant's affidavit was automatically withdrawn, as well. However, Mr. Gold advised defendant that Ms. Billini's case had been dismissed, defendant's disagreement with Ms. Billini about modifying visitation had become moot once Ms. Billini withdrew her petition, and Mr. Gold had prevailed on that issue. Mr. Gold also advised defendant that he had agreed to withdraw defendant's petition for sanctions against Ms. Billini and take up the sanctions issue with a support magistrate in Support Court, all without consulting defendant and to the detriment of defendant's case. Mr. Gold improperly believed that the Support Magistrate had the power to deal with visitation issues.
After defendant ordered and reviewed the transcript of the April 14, 2005 hearing, he discovered that Mr. Gold had lied to him. Defendant "spent the next ten months litigating in Support Court, with Mr. Gold billing me the entire time and telling me that my only chance to protect my child from parental alienation lay in convincing the support magistrate that he had the authority to hear a visitation issue." Mr. Gold also perjured himself under oath in front of Support Magistrate Ryneski, repeating his story that Judge Sturm had told him to take the visitation case to the Support Magistrate, defendant alleges.
Defendant alleges that even as late as April 2006, Mr. Gold insisted that Judge Sturm asked him to take defendant's visitation case to Support Magistrate Ryneski, even though the Support Magistrate lacked authority to sanction Ms. Billini for noncompliance with visitation.
Such allegations are sufficient to support defendant's claim that plaintiff breached its duty to defendant.
Further, contrary to defendant's contention, it cannot be said that defendant failed to sufficiently allege that the fees defendant paid to plaintiff during the course of defendant's negligently performed legal services were the proximate cause of defendant's alleged breaches.
It is well settled that "an essential element" in any legal malpractice action is "actual damages, i.e., the injuries he suffered and their value" ( Lindenman v Kreitzer at 34-35, citing Mendoza v Schlossman, 87 AD2d 606, 607 [2d Dept 1982]). Further, such damages must be established with "reasonable certainty" ( Creative Inception, Inc. v Andrews, 50 AD2d 553, 554 [1 st Dept 1975]). Here, defendant alleges that plaintiff "wasted" the $34,943 defendant paid Mr. Gold "because plaintiff was not competent and failed to represent the defendant vigorously" from 2002 to 2006. Defendant alleges that Mr. Gold belatedly and mistakenly filed a counterclaim for sanctions against Ms. Billini, instead of a motion for sanctions, which was the correct action. Defendant further alleges:
I ended up with legal bills from Mr. Gold of roughly $55,000, for four years of agony during which he never presented a shred of evidence to a judge regarding the systematic alienation of my son from me, by my son's mother. In all four years there was never a trial, probably because Mr. Gold never insisted on one. He was apparently happy to have the case go on year after year, while he continued to bill me. ( id., ¶ 33)
Plaintiff "is not obliged to show, at this stage of the pleadings, that [it] actually sustained damages . . . [it need only plead] allegations from which damages attributable to [defendant's conduct] might be reasonably inferred" ( In Kine Pharmaceutical Co., Inc. v Coleman, 305 AD2d 151, 152 [1st Dept 2003]) citing Tenzer, Greenblatt, Fallon Kaplan v Ellenberg, 199 AD2d 45; see also Great Atlantic Ins. Co. v Weinstein, 125 AD2d 214, 215 [1st Dept 1986] [holding that insurer's legal malpractice complaint, which stated that attorneys had breached duty to exert best efforts on behalf of client, was legally sufficient to state causes of action]). Further, defendant alleges that he had to incur and continues to incur "additional legal costs to attempt to rectify" the alleged malpractice by plaintiff. Generally, a party can recover damages for legal malpractice where attorneys' fees were allegedly incurred in retaining new counsel to perform the services for which the attorney was originally retained ( see Rudolf v Shayne, Dachs, Stanisci, Corker Sauer). Here, defendant alleges that he incurred expenses to avoid, minimize, or reduce the damage caused by plaintiff's alleged wrongful conduct, Therefore, the branch of defendant's motion for leave to serve the Proposed Answer to assert legal malpractice is granted, and dismissal of same is denied.
However, defendant's claim that his relationship with his son was "irreparably damaged, causing defendant great emotional and psychological distress" is likewise insufficient to support his legal malpractice claim. Defendant alleges that today his son is completely alienated from him; he will not voluntarily talk to or see defendant. However, it is well established that "damages such as emotional distress and psychic injury are not recoverable within the context of a legal malpractice action" ( Kaiser v Van Houten, 2003 WL 22137465, *3, 2003 NY Slip Op 51266 [U] [NY Sup 2003], citing Epifano v Schwartz, 279 AD2d 501 [2d Dept 2001]). The First Department explains: "A cause of action for legal malpractice does not afford recovery for any item of damages other than pecuniary loss so there can be no recovery for emotional or psychological injury" ( Wolkstein v Morgenstern, 275 AD2d 635, 637 [1st Dept 2000]). Accordingly, defendant's allegation that he suffered emotional and psychological stress as a result of plaintiff s actions is insufficient to support a claim for legal malpractice.
Further, the allegation that defendant has a child support order well in excess of what he would otherwise be required to pay is insufficient. "The client must plead specific factual allegations establishing that but for counsel's deficient representation, there would have been a more favorable outcome to the underlying matter" ( Dweck Law Firm, LLP v Mann, 283 AD2d 292, 293, 727 NYS2d 58, 59-60 [1st Dept 2001]). Here, the Proposed Answer fails to indicate that defendant would have recovered a child support order more favorable than the one issued in the underlying action. Accordingly, defendant has not sufficiently alleged damages for excessive child support payments to support his legal malpractice claim.
Likewise, defendant failed to sufficiently state a claim for punitive damages. In order to establish a claim for punitive damages, the movant must "allege facts demonstrating that the [attorney's] conduct was so outrageous as to evince a high degree of moral turpitude and showing such wanton dishonesty as to imply a criminal indifference to civil obligations" ( Zarin v Reid Priest, 184 AD2d 385, 388 [1st Dept 1992], citing Walker v Sheldon, 10 NY2d 401, 405). Thus, the harmful conduct must be "intentional, malicious, outrageous, or otherwise aggravated beyond mere negligence" ( McDougald v Garber, 73 NY2d 246). Further, it is well settled that the purpose of punitive damages is not to remedy private wrongs, but to vindicate public rights ( see Garrity v Lyle Stuart, Inc., 40 NY2d 354, 358). Thus, a private party seeking to recover punitive damages must not only demonstrate egregious tortious conduct by which he was aggrieved and which is actionable as an independent tort, but also that such conduct was part of a pattern of similar conduct directed at the public generally ( see New York University v Continental Ins. Co., 87 NY2d 308, 315-316; Rocanova v Equitable Life Assurance Society of United States, 83 NY2d 603, 613).
Even assuming the truth of defendant's allegation that plaintiff misled defendant regarding the status of his petition for sanctions against Ms. Billini, such allegation was not "so outrageous as to evince a high degree of moral turpitude" ( Zarin v Reid Priest at 386 [rejecting punitive damages claim where plaintiff alleged that "defendants engaged in a course of conduct designed to cover up their negligence by failing to 'admit their error' and offering plaintiffs a false affidavit which justified their conduct and concealed their negligence"]). Nor are there any allegations that plaintiff's conduct was aimed not solely at this plaintiff, but also at the public, generally ( American Transitions. Co. v Associated International Ins. Co., 261 AD2d 251 [1st Dept 1999]). Accordingly, defendant has failed to sufficiently allege punitive damages.
Thus, as defendant sufficiently alleges that plaintiff's alleged misconduct was the proximate cause of his damages, the branch of plaintiff's motion for leave to amend as to plaintiff's first counterclaim for legal malpractice is granted.
Violation of Written Retainer Agreement
As to defendant's second counterclaim that plaintiff violated 22 NYCRR § 1400.3 by executing an retainer agreement containing ambiguous language regarding the arbitration and the nature of representation, said Rule provides in relevant part:
An attorney who undertakes to represent a party and enters into an arrangement for, charges or collects any fee from a client shall execute a written agreement with the client setting forth in plain language the terms of compensation and the nature of services to be rendered. ( emphasis added)
The Arbitration Clause of the Representation Agreement provides in pertinent part that "in the event that a dispute arises between us concerning our attorneys' fees and expenses, you have an absolute right to have those disputes resolved through arbitration which will be binding upon both our firm and yourself."
The Representation Agreement also states: "This retention includes general counseling, negotiating, document preparation and litigation related services in connection with seeking visitation with, but not custody of your son" (emphasis added). However, the Complaint, indicates that plaintiff performed services related to custody:
Altman entered into a written Representation Agreement, dated as of April 24, 2002, with and retained the Plaintiff to perform legal services for him (hereinafter the "Agreement") in connection with matters, inter alia, relating to his relationship with, and the custody, visitation, and support of his son, and Altman's relationship with the mother of his son. (Complaint, ¶ 4) ( emphasis added)
Since the phrase "visitation . . . but not custody" in the Representation Agreement excludes "custody" and "support," the Proposed Answer sufficiently alleges that the Retainer Agreement failed to satisfy the "plain language" requirement of § 1400.3 regarding the nature of services to be rendered, defendant argues.
Contrary to plaintiff's contention, the proposed second counterclaim is not barred by res judicata. The doctrine of res judicata, or claim preclusion, bars parties from relitigating causes of action between them that were actually litigated or could have been litigated in the earlier action ( Daimler Chrysler Corp. v Spitzer, 782 NYS2d 610, 2004 NY Slip Op 24357 [2004], affd 26 AD3d 88 [3d Dept 2005], lv to appeal granted 7 NY3702 [2006], order affd 7 NY3d 653 [2006]; see Hyman v Hillelson, 79 AD2d 725, 726, affd 55 NY2d 624 [1981]). In Jefferson Towers v Public Serv. Mut. Ins. Co. ( 195 AD2d 311 [1st Dept 1993]), the Appellate Division, First Department stated that "a second action may not be barred even if both actions arise from an identical course of dealing, if the . . . elements of proof and evidence required to sustain recovery vary materially" ( Jefferson Towers v Public Serv. Mul. Ins. Co. at 313 citing Lukowsky v Shalit, 110 AD2d 563, 566).
In Motion Sequence #001, defendant moved to dismiss the Complaint, pursuant to CPLR § 3211(a)(5), for, inter alia, arbitration and award, arguing that plaintiff waived its right to a judicial de novo review of the fee dispute under the Arbitration Clause of the Representation Agreement. The Court held that the Arbitration Clause did not contain the express waiver language required by 22 NYCRR § 137.2(c), and therefore, the parties retained their right to seek judicial de novo review of their fee dispute, notwithstanding language suggesting otherwise. However, in Motion Sequence #001, defendant did not raise — and the Court did not address — defendant's proposed counterclaim alleging that the language the Representation Agreement is ambiguous, in a violation of 22 NYCRR § 1400.3. As discussed above, res judicata bars parties from relitigating causes of action between them that were actually litigated or could have been litigated in the earlier action ( DaimlerChrysler Corp. v Spitzer). Further, the Court in Motion Sequence #001 did not entertain any arguments about the nature of plaintiff's services under the Representation Agreement. Therefore, defendant has sufficiently stated a cause of action in his second counterclaim, which is not barred by res judicata. Judiciary Law § 487
Defendant's third proposed counterclaim alleges that plaintiff engaged in attorney misconduct in violation of JL § 487. JL § 487 provides in relevant part that an attorney or counselor who is "guilty of any deceit or collusion, or consents to any deceit or collusion, with intent to deceive the court or any party . . . [i]s guilty of a misdemeanor, and in addition to the punishment prescribed therefor by the penal law, he forfeits to the party injured treble damages, to be recovered in a civil action." The alleged deceit must have been directed at the court or must have occurred during the course of a pending judicial proceeding ( Costalas v Amalfitano, 305 AD2d 202, 204 [1 Dept 2003]), and caused actual damages, i.e. "pecuniary harm" ( New York City Transit Authority v Morris J. Eisen, P.C., 276 AD2d 78, 86 [1st Dept 2000]). Finally, JL § 487 is to be applied only to a "chronic, extreme pattern of legal delinquency" ( Wiggin v Gordon, 115 Misc 2d 1071, 1077 [NY City Civ Ct 1982]; see also Solow Management Corp. v Seltzer, 18 AD3d 399, 400 [1st Dept 2005] [holding that a complaint setting forth only one "arguable misrepresentation" by the defendant does not allege a cognizable claim under JL § 487]).
Defendant's allegation that plaintiff fraudulently induced him into signing the Representation Agreement is insufficient, since such act was not directed at the court, or performed during the course of a pending judicial proceeding ( see Costalas v Amalfitano). Defendant signed the Representation Agreement before any judicial proceeding had begun. Therefore, plaintiffs alleged inducement of defendant to sign the Representation Agreement cannot support defendant's JL § 487 claim.
However, it is alleged that immediately after the April 14, 2005 hearing, Mr. Gold called defendant in Florida, and instead of admitting to misfiling the petition, adjusting his billing of plaintiff, and returning to the court the next day to refile the petition, Mr. Gold concocted a false story to cover his mistakes. Defendant alleges that he spent the next ten months litigating in Support Court, with Mr. Gold billing defendant with the advice that defendant's only chance "to protect my child from parental alienation lay in convincing the support magistrate that he had the authority to hear a visitation issue." It is also alleged that as a result of Mr. Gold's "deceitful behavior," defendant sustained damages in terms "years of billing for unnecessary legal work, incompetent legal work, subsequent legal bills and costs to attempt to correct Gold's mistakes, as well as the costs and legal expenses of traveling from Florida and prosecuting a Part 137 arbitration in New York." Further, it is alleged that defendant was billed $34,943 for unnecessary work, as a result of plaintiff's deceit. Therefore, defendant has alleged actual damages of $34,943.
Finally, defendant has sufficiently alleged that plaintiff's conduct was a chronic, extreme pattern of legal delinquency ( Schindler v Issler Schrage, 262 AD2d 226, 228, lv dismissed 94 NY2d 791, rearg denied 94 NY2d 859 [1st Dept 1999], quoting Wiggin v Gordon, at 1077). The Court in Wiggin v Gordon held that an attorney's "action in taking $ 1,200.00 from plaintiff in July, 1976 and his willful refusal to pay the estate taxes for five years, and his willful refusal for the past six years to return the funds to plaintiff," as well as his "his protracted indifference to this proceeding, now pending for the past 10 months" constituted a chronic, extreme pattern of legal delinquency ( id. at 1077).
Here, it is alleged that on more than one occasion plaintiff engaged in deceitful conduct in an attempt to hide its errors from plaintiff and the court ( cf. Solow Management Corp. v Seltzer). Defendant alleges that plaintiff not only lied to defendant during a pending court proceeding and but also repeated the lie before a court, in violation of the specific provisions of JL § 487 ( Schindler v Issler Schrage). Defendant alleges that plaintiff lied to defendant about the Family Court's judge's instruction, and lied to the Support Magistrate about the Family Court judge's instruction. Further, defendant alleged that despite the lapse of time since the April 14, 2005 Family Court hearing, plaintiff never disclosed the truth to either plaintiff or the tribunal. Defendant only discovered plaintiff's allege deceit after he reviewed the transcript of the April 14, 2005 hearing. Therefore, plaintiff's alleged conduct resembles the "protracted indifference" to the Court, sufficient to state a claim under JL § 487.
Fraud
Defendant's fourth proposed counterclaim alleges that plaintiff engaged in fraud. In order to state a cause of action for fraudulent misrepresentation, a movant must allege that (1) a party made a material false representation, (2) the party intended to defraud the movant thereby, (3) the movant reasonably relied upon the representation, and (4) the movant suffered damage as a result of his or her reliance ( Swersky v Dreyer and Traub, 219 AD2d 321, 326 [1st Dept 1996]). CPLR § 3016(b) requires that fraud must be pleaded with sufficient particularity, i.e. in sufficient detail to give adequate notice ( see Foley v D'Agostino, 21 AD2d 60, 64 [1st Dept 1964]). CPLR § 3016(b) does not require a plaintiff to prove his allegations. Indeed, the Court of Appeals has specifically noted that this rule "is not to be interpreted so strictly as to prevent an otherwise valid cause of action in situations where it may be impossible to state in detail the circumstances constituting a fraud" ( Lanzi v Brooks, 43 NY2d 778, 780 [citation omitted]). Further, on a motion to dismiss for failure to state a cause of action, "a plaintiff . . . need only plead that he relied on misrepresentations made by the defendant . . . since the reasonableness of his reliance [generally] implicates factual issues whose resolution would be inappropriate at this early stage" ( Guggenheimer v Bernstein Litowitz Berger Grossmann LLP, 11 Misc 3d 926 [NY Sup 2006]).
Here, the record contains sufficient allegations to support a cause of action for fraudulent misrepresentation. Defendant alleges that plaintiff made a material misrepresentation in the Representation Agreement that any fee disputes would be subject to binding arbitration. Defendant also alleges that plaintiff made a material misrepresentation at the time defendant signed the Representation Agreement by assuring defendant that "he was competent and experienced in matters related to Family Court and family law." Defendant further alleges that plaintiff intended to induce defendant to enter into the attorney-client relationship by making these misrepresentations. Plaintiff made this representation knowing that the "binding" Arbitration agreement was in fact non-binding, defendant alleges. Defendant further alleges that "Mr. Gold misrepresented his competence and concealed his lack of experience, for the purpose of inducing me to rely upon such assurances and to enter into a retainer agreement with him and to hire him, although he knew he was not capable of doing the job." When defendant signed the Representation Agreement, he did not want to be in a position where he would have to hire an attorney to sue plaintiff, or to travel to New York for a trial de novo in court, should there be a fee dispute. Defendant further alleges he relied on plaintiff's misrepresentations about Mr. Gold's competence, when he signed the Representation Agreement.
Defendant further alleges that plaintiff made a material representation by lying to defendant about misfiling his contempt petition at the April 2005 hearing, and telling defendant a false story that the judge had asked defendant to try a visitation case in support court. These misrepresentations were "an intentional deception for the purpose of driving up legal fees," defendant alleges. Defendant also relied on plaintiff's misrepresentations about what happened with his contempt petition when defendant continued to pay plaintiff attorneys' fees during the proceeding. "I relied on Gold's lie and pursued litigation in support court, resulting in unnecessary billing, and wasting the money I had paid him previously, on the presumption (deceptively claimed by Gold) that we were taking steps necessary to previously to prepare for a contempt proceeding against Ms. Billini."
As a result of defendant's justifiable reliance on plaintiff's misrepresentations, defendant suffered pecuniary damages, i.e., bills of approximately $55,000, and paid travel costs to New York for each hearing wherein he had to appear, travel and legal expenses for the supposedly "binding" arbitration, further legal costs to correct the Family Court mistakes of Mr. Gold, and "various other consequential damages," including the loss of his relationship with his son.
Although plaintiff states a claim for fraud, which is not barred by res judicata, such claim is duplicative of defendant's legal malpractice claim. The First Department in Sage Realty Corp. v Proskauer Rose ( 251 AD2d 35 [1st Dept 1998]) held that the plaintiffs failed to state a cause of action for fraudulent or negligent misrepresentation of expertise because it was "duplicative of plaintiffs' [legal] malpractice claim, which was based on the same alleged acts of nondisclosure and misrepresentation" ( id. at 38-39). As defendant's proposed counterclaim for fraud is duplicative of his proposed counterclaim for legal malpractice, the branch of defendant's motion to serve the Proposed Answer as to fraud is denied.
Breach of Fiduciary Duty
Defendant's fourth proposed counterclaim alleges that plaintiff breached its fiduciary duty to defendant. To assert a cause of action for breach of fiduciary duty, a movant must plead the following three elements: (1) the existence of a fiduciary duty between the parties, (2) the breach of that duty, and (3) damages suffered by the movant as a result of the breach ( DDCLAB Ltd. v E.I. DuPont De Nemours and Co., 2005 WL 425495 [SDNY 2005]). An attorney/client relationship as an example of a relationship "sufficiently rooted in trust and confidence to trigger super-contractual fiduciary duties" ( Reuben H. Donnelley Corporation. v Mark I Marketing Corp., 893 F Supp 285 [SDNY 1995]). In the context of an action asserting attorney liability, the claims of malpractice and breach of fiduciary duty are governed by the same standard of recovery ( Ulico Cas. Co. v. Wilson, Elser, Moskowitz, Edelman Dicker, 56 AD3d 1, 865 NYS2d 14 [1 st Dept 2008]).
Here, the breach of fiduciary duty claim "merely tracks" the allegations of defendant's legal malpractice claim "and does not allege any independent intentional tort" is duplicative and warrants dismissal ( CVC Capital Corp. v Weil, Gotshal, Manges, 192 AD2d 324, 325 [1st Dept 1993], citing Zarin v Reid Priest at 387 [holding that a second cause of action was "fatally deficient" in that it "merely rehashes the allegations of the malpractice claim and does not allege any independent intentional tort"]; see also Tal v Leber, 2008 WL 4274490, *8 [NY Sup 2008]). Defendant alleges that Mr. Gold was in a position of power and confidence, and breached his duty to be scrupulously fair and honest with defendant by not disclosing the true meaning of his fee arrangements or services, his lack of experience and knowledge regarding Family Court matters, his misfiling of defendant's contempt petition, and his taking defendant's case into a court with no jurisdiction). Plaintiff's conduct induced defendant to engage and continue to employ Mr. Gold "over a four-year period between 2002 to 2006," resulting in damages of $34,943.09, as well as travel costs to New York to appear at hearings, further legal costs to correct Mr. Gold's mistakes of Gold, and various other consequential damages, including the loss of defendant's relationship with his son.
However, these allegations merely track and rehash the allegations of his counterclaim for legal malpractice. It does not allege an independent tort. As defendant's proposed counterclaim for fraud is duplicative of his proposed counterclaim for legal malpractice, defendant has failed to state a cause of action in his fifth proposed counterclaim.
Based on the above findings, the parties' respective applications for sanctions are denied.
Plaintiff's Motion to Dismiss
Plaintiff's motion to dismiss has been subsumed and addressed in the discussion of defendant's motion to serve the Proposed Answer. The second and third counterclaims for unjust enrichment and termination for cause, respectively, in the Amended Answer, have been abandoned by defendant in his Proposed Answer and are deemed hereby dismissed ( Snedecor v Chapel, 192 AD 915 [2d Dept 1920] [It is well settled that the filing of a new answer "wholly supersedes the original answer"]; 3 Carmody's New York Practice, § 1141, p. 2518).
Conclusion
Based on the foregoing, it is hereby
ORDERED that the motion of defendant Paul H. Altman, for an order granting him leave to serve plaintiff Morelli Gold, LLP with the Second Amended Answer, pursuant to CPLR § 3025(b), is granted as to the first, second and third proposed counterclaims, and denied as to the fourth and fifth proposed counterclaims; and it is further
ORDERED that plaintiff's motion to dismiss defendant's counterclaims in the Amended Complaint is granted as to the second and third counterclaims therein; and it is further
ORDERED that defendant serve a copy of this order with notice of entry upon all parties within 20 days of entry.
That constitutes the decision and order of the Court.