Opinion
Index 513265/2020
01-03-2022
286 Corbin Owners Corp., Plaintiff, v. David Berger, Esq., Tenenbaum Berger & Shivers, LLP, Berger Fink LLP and Wishful Thinking Realty Corp., Defendants.
Unpublished Opinion
PRESENT: HON. WAVNY TOUSSAINT, Justice,
Wavny Toussaint Judge
The following e-filed papers read herein: NYSCEF Doc Nos.
Notice of Motion/Order to Show Cause/ Petition/Cross Motion and Affidavits (Affirmations) Annexed __51 -73; 74-94; 110-115
Opposing Affidavits (Affirmations)__. 100-109; 118; 119-120
Reply Affidavits (Affirmations)__ 117; 121
Upon the foregoing e-filed papers in this legal malpractice dispute, defendants David Berger, Esq. (Berger), Tenenbaum Berger & Shivers, LLP (TB&S), and Berger Fink LLP (Berger Fink) move, in motion sequence 003, for an order (i) dismissing plaintiffs complaint pursuant to CPLR 3211 (a) (1) and (a) (7), and (ii) granting costs, legal fees and sanctions against plaintiff pursuant to 22 NYCRR 130-1.1. Defendant Wishful Thinking Realty Corp. (Wishful) moves, in motion sequence 004, for an order dismissing plaintiffs complaint pursuant to CPLR 3211 (a) (1) and (a) (7). Plaintiff opposes both motions and 1 cross-moves, in motion sequence 005, for an order awarding it attorneys' fees and costs, pursuant to 22 NYCRR 130-1.1, for having to defend against defendants' motions.
Background Facts and Procedural History
The following facts are gleaned from plaintiffs amended verified complaint unless otherwise noted. Plaintiff is a co-op that owns and manages the lands and buildings located at 286 Corbin Place in Brooklyn, New York (hereinafter the Property). Nonparties Joglo Realties, LLC (Joglo) and Robert Toussie (Toussie) claimed to -own a strip of land, commonly referred to as the "esplanade," which runs southeast along 286 Corbin Place between the Property and the Atlantic Ocean.
After Hurricane Sandy struck on or around October 28, 2012, the Property allegedly sustained significant damage due to flood waters forcing boulders and other debris from the esplanade onto plaintiffs property. Plaintiff attributed the damage to Joglo and Toussie's failure to properly secure, care for, and construct, the necessary protections, such as a seawall, on the esplanade.
In or around March 2014, plaintiff retained Berger and his firm at the time, TB&S, to prosecute an action against Joglo and Toussie for trespass and negligence, among other causes of action (see NYSCEF Doc. No. 57, Verified Complaint for 2014 Actions). Plaintiff paid a $5,000.00 retainer fee (NYSCEF Doc. No. 47, Amended Complaint, ¶ 70). Plaintiff also paid $975.00 for "pre-litigation research" in January 2014 (id at ¶ 112). By letter dated February 14, 201 [4], Berger advised plaintiff that he had conducted research on plaintiffs behalf and determined that the esplanade was titled to Joglo, an entity owned 2 by Toussie, and that Plaintiff had viable causes of action for, inter alia, trespass, nuisance, negligence that would likely result in an award of damages (id. at ¶ 74).
On May 9, 2014, TB&S commenced two actions on behalf of plaintiff against Joglo and Toussie bearing Kings County Supreme Court Index Nos. 7143/14 and 7161/14 (id. at ¶ 75). Initial settlement negotiations were held by the parties' respective counsel between May 9, 2014 and September 19, 2014 (id. at ¶ 76). Joglo and Toussie never filed answers to plaintiffs two complaints (id. at ¶ 77).
By letter dated August 27, 2014, counsel for Joglo and-Toussie informed Rebecca A. Crance, Esq. (Crance) at TB&S that Joglo and Toussie did-not own, nor had they ever owned, or claimed" to have owned the portion of the esplanade referenced in plaintiffs complaint (NYSCEF Doc. No. 81, August 27, 2014 Letter). Said letter also demanded that plaintiff withdraw its complaint otherwise Joglo and Toussie would seek sanctions against plaintiff for prosecuting a frivolous action (id.).
Crance responded by letter dated September 4, 2014, stating that TB&S and plaintiff had "done their due diligence" and "a basic 'title/deed search, '" and determined that Joglo and Toussie "do in fact own at least a portion of the esplanade that borders [plaintiff s] property" and, further, that Joglo and Toussie "have held themselves out to be the owners to [plaintiff]..." (NYSCEF Doc. No. 79, September 4, 2014 Letter). Crance's letter further stated that if Joglo and Toussie were "willing to sign a settlement agreement that they do not own the esplanade that borders [plaintiff s] property...," then plaintiff would discontinue the action (id.). 3
Crance forwarded a copy of her letter to Arthur Wiener (Wiener), plaintiffs vice president, with a cover letter dated September 3, 2014 conveying her suspicion that Joglo and Toussie would either answer plaintiffs complaint or file a pre-answer motion to dismiss but that if they did not do either, TB&S would; be "filing a motion for default to move this matter along" (NYSCEF Doc. No. 103). According to plaintiff, the initial August 27, 2014 letter from Joglo and Toussie's counsel wherein he maintained that his clients were not the esplanade's owners was never forwarded to plaintiff.
In or about August 2018, Berger left TB&S to join Berger Fink.
On or around December 31, 2018, Wiener, on behalf of plaintiff, purportedly complained to Berger that his firm had failed to timely seek a default judgment against Joglo and Toussie, among other things, and that the statute of limitations had expired. On January 2, 2019, Berger replied, via email, that he could still make the motion for default judgment, that the delay in doing so would not pose a problem, and "to that end" requested that Wiener sign a consent to change attorneys (NYSCEF Doc. No. 104, Berger Correspondence). Purportedly on that reassurance, plaintiff substituted Berger Fink as counsel for the 2014 Actions. However, a default judgment was never pursued by Berger Fink and, on March 22, 2019, plaintiff terminated Berger Fink as counsel.
On July 23, 2020, plaintiff commenced the instant action against Berger, TB&S, Berger Fink and Wishful alleging, in sum and substance: (1) malpractice for failing to obtain default judgments against Joglo and Toussie in the 2014 Actions (first cause of action); (2) malpractice for failing to sue the correct party within the statute of limitations 4 period (second cause of action); (3) malpractice for collecting legal fees for the undertaking and commencement of the 2014 Actions when defendants knew or should have known said actions had no merit (third cause of action); (4) unjust enrichment for collecting legal fees but then failing to prosecute a viable action (fourth cause of action); and (5) entitlement to attorneys' fees for the instant action (fifth cause of action).
Plaintiff also seeks to recover against Wishful alleging that Wishful and Berger's previous and current law firms, TB&S and Berger Fink respectively, are alter egos of one another (Amended Complaint, ¶¶ 9, 10). Plaintiff alleges that Berger's law firms were/are undercapitalized in relation to their needs and thus were/are being financed by Wishful (id. at ¶¶ 16, 27). Further, that the entities share common office space, telephone numbers, employees and owners, and that corporate formalities are not observed (id. at ¶¶ 11-29).
Motions to Dismiss
In the instant motion, the Berger Defendants move, pre-answer, to dismiss plaintiffs complaint arguing that plaintiff cannot sustain a malpractice claim against them because the documentary evidence shows that the 2014 Actions against Joglo and Toussie were demonstratively without merit. In support, the Berger Defendants proffer the August 27, 2014 letter from Joglo and Toussie's counsel to Crance, as well as every recorded deed for the Property since 1968, which, the Berger Defendants contend shows that neither Joglo nor Toussie ever owned any portion of the esplanade abutting or adjacent to the Property at any time. The Berger Defendants posit that, based on these deeds, either plaintiff owns the esplanade or it is not owned by anyone. Because the 2014 Actions against Joglo and 5 Toussie were meritless, the Berger Defendants contend that plaintiff cannot plead or prove that it would have recovered damages in the 2014 Actions "but for" their negligence.
To the extent that plaintiff claims that it was denied the opportunity to prosecute a r viable action against a different defendant, the Berger Defendants submit that same is insufficient to withstand their motion to dismiss because plaintiff fails to identify any such defendant against whom it would have obtained more advantageous results "but for" the Berger Defendants' negligence. Stated differently, the Berger Defendants contend that the issue is not whether plaintiff was deprived of an opportunity to sue a phantom defendant but whether plaintiff would have won against a specific defendant, which plaintiff fails to allege.
As for plaintiffs fourth cause of action sounding in unjust enrichment, the Berger Defendants contend that said claim is precluded by the express terms of the retainer agreements between plaintiff and the defendant law firms. Regarding plaintiffs fifth cause of action seeking attorneys' fees, the Berger Defendants argue that plaintiff fails to plead any facts showing a contractual or statutory basis to support an award of attorneys' fees incurred in this matter. Finally, the Berger Defendants seek sanctions against plaintiff pursuant to 22 NYCRR 130-1.1 for maintaining this action, which they argue is without merit in law and cannot be supported by any reasonable argument.
By way of a separate motion, Wishful also moves to dismiss plaintiffs complaint and joins in the Berger Defendants' arguments. In addition, Wishful contends that plaintiffs complaint must be dismissed as against it because there is no attorney-client 6 relationship or privity of contract between Wishful and plaintiff, and further, plaintiff fails to allege that it had any communications with Wishful, that it received any legal bills from Wishful or that Wishful undertook any task on plaintiff's behalf.
Plaintiffs Opposition and Cross Motion
In opposition to both motions and in support of its cross motion seeking an award of costs and sanctions against defendants, plaintiff argues (1) that the August 27, 2014 letter from Joglo and Toussie's counsel to Crance is inadmissible as documentary evidence under CPLR 3211 (a) (7), and (2) that neither the letter nor the 12 consecutive deeds for the Property conclusively shows who owns the esplanade because the language relied upon by defendants is not actually part of the metes-and-bounds description of the conveyed parcel and, in any case, said language does no more than grant an easement to the streets and land adjacent to and abutting the conveyed property (see NYSCEF Doc. No. 100, Wiener. Affidavit, ¶¶ 13-15). According to Wiener, a historical survey is required to properly determine who owns the esplanade parcel, which the Berger Defendants were tasked with but failed to do (id. at ¶ 13).
Plaintiff thus argues that the defendants' motions fail to address their failure to investigate, identify and timely sue the correct owners of the esplanade before the expiration of the statute of limitations. Moreover, plaintiff argues that defendants were obligated to properly investigate whether they were bringing the 2014 Actions against the correct defendants, even if they had not been specifically retained pre-litigation to do so. That defendants failed to do so, despite indications that Joglo and Toussie were not the 7 correct defendants, constitutes malpractice, according to plaintiff, since a lawyer acting reasonably prudently under the circumstances would have discovered in 2014 that Joglo and Toussie were not the esplanade's owners. In his affidavit, Wiener, avers that all communications with Berger, up until the April 11, 2019 correspondence, indicated that the 2014 Actions were viable and that a default judgment could still be obtained against Joglo and Toussie despite the passage of time (id. at ¶ 10). Plaintiff also notes that Berger claimed, for the first time, that the 2014 Actions had no merit by way of his April 11, 2019 correspondence (id at ¶ 11). Regarding its claims for unjust enrichment and attorneys' fees, plaintiff argues that dismissal of these claims would be premature.
In response to Wishful's motion, plaintiff argues that it has adequately plead alter ego liability against if by alleging the integration of finances and commingling of assets between Wishful and TB&S and, later, Berger Fink. Plaintiff avers that it has also alleged that Wishful controlled TB&S and Berger Fink, both of which depended on Wishful for advances and direct payments to employees, and that these entities shared common owners, officers and directors, office space, employees, addresses and telephone numbers.
Finally, plaintiff contends that it is entitled to recover its attorney's fees, costs and disbursements on this motion because defendants have submitted a knowing falsehood to the court by asserting that plaintiff owns the esplanade in an attempt to excuse their negligence and malpractice. 8
Defendants' Replies
In reply and in opposition to plaintiffs cross-motion for sanctions, the Berger Defendants contend that plaintiffs assertion that a "historical survey" is needed lacks merit since, upon information and belief, such a survey occurred in 2002 for the purposes of creating a map of taxable parcels of real property in the City of New York, which, together with the deeds to the Property, demonstrates that either plaintiff owns the esplanade or it is not owned by anyone. The Berger Defendants also assert that they exercised reasonable care and diligence in commencing the 2014 Actions based upon numerous circumstances existing at the time, including the fact that Joglo and Toussie repeatedly asserted ownership over the esplanade, hired a lawyer, and were highly litigious, as well as plaintiff s own mistaken belief that Joglo and Toussie owned the esplanade. Finally, the Berger Defendants reiterate that, having failed to identify a defendant against whom it would have obtained more advantageous results in the 2014 Actions plaintiff has failed to properly plead' "but for" causation and that any claim that defendants should have discovered the meritless nature of the 2014 Actions sooner, or for lesser legal fees, amounts to sheer speculation.
In its reply, Wishful re-emphasizes plaintiff s failure to allege any facts "that Wishful had anything to do with the 2014 Actions. Wishful also points out plaintiffs concession that it was not even aware of the supposed "alter ego" status of Wishful until January 2019, when it retained Berger Fink (Amended Complaint, ¶ 31). Finally, Wishful asserts that plaintiff fails to allege that anyone supposedly from Wishful even identified themselves as 9 such in any manner from January 2019 to March 2019, when plaintiff terminated Berger Fink as counsel.
Discussion
On a motion to dismiss the complaint for failure to state a cause of action under CPLR 3211 (a) (7), the court must afford the pleading a liberal construction, accept all facts as alleged in the pleading to be true, accord the plaintiff the benefit of every possible inference, and determine only whether the facts as alleged fit within any cognizable legal theory (Hyatt v Wilmington Sav. Fund Socy., FSB, 186 A.D.3d 1621, 1622 [2d Dept 2020]). "Whether the complaint will later survive a motion for summary judgment, or whether the plaintiff will ultimately be able to prove its claims, of course, plays no part in the determination of a pre-discovery CPLR 3211 motion to dismiss" (Doe v Ascend Charter Schs., 181 A.D.3d 648 [2d Dept 2020] [citing to Shaya B. Pac, LLC v Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, 38 A.D.3d 34, 38 [2d Dept 2006]). Further, a motion to dismiss a complaint pursuant to CPLR 3211 (a) (1) may be granted only if the documentary evidence submitted by the moving party utterly refutes the factual allegations of the complaint, "conclusively establishing a defense as a matter of law" (Goshen v Mutual Life Ins. Co. of N. Y., 98 N.Y.2d 314, 326 [2002]).
"In an action to recover damages for legal malpractice, a plaintiff must demonstrate that the attorney 'failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession' and that the attorney's breach of this duty proximately caused plaintiff to sustain actual and ascertainable damages" (Call v Maio, 10 189 A.D.3d 1337, 1338, [2d Dept 2020] [citations omitted). "To establish causation, a 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" (Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 N.Y.3d 438, 442 [2007]).
Here, to the extent that plaintiff alleges that the Berger Defendants carelessly or negligently recommended that it sue Joglo and Toussie and/or that the Berger Defendants negligently failed to sue the proper defendants before the expiration of the statute of limitations (second cause of action), plaintiff states a claim for legal malpractice. The assertion that plaintiff must allege and identify the "correct" defendant in its pleading to state a claim for malpractice is without any legal support. In any event, whether plaintiff can ultimately prevail on these allegations is not relevant on this pre-answer motion to dismiss (see Endless Ocean, LLC v Twomey, Latham, Shea, Kelley, Dubin & Quartararo, 113 A.D.3d 587, 589 [2d Dept 2014]). The court also declines to dismiss plaintiffs third cause of action alleging that the Berger Defendants collected legal fees and commenced the underlying action when they knew or should have known that the action had no merit. Defendants do not address the merits of this claim and the proffered documentary evidence does not establish a defense to said claim as a matter of law.
However, plaintiffs first cause of action alleging-malpractice due to the Berger Defendants' failure to obtain a default judgment against Joglo and Toussie in the 2014 Actions must be dismissed pursuant to CPLR 3211 (a) (7) since plaintiff fails to allege that it would have prevailed in the 2014 Actions had the Berger Defendants moved for a default 11 judgment. Notably, while plaintiff argues that the 12 deeds proffered by defendants fail to establish that Joglo and Toussie are not the owners of the esplanade, plaintiff does not actually contend herein that Joglo and Toussie own the esplanade. Thus, plaintiff fails to state a claim for legal malpractice insofar as such claim is premised on a failure to obtain a default judgment or pursue the 2014 Actions against Joglo and Toussie.
As for plaintiffs claims for unjust enrichment and attorney's fees (fourth and fifth causes of action), said claims must be dismissed for the reasons stated by defendants. Contrary to plaintiffs assertion, it is not premature to dismiss these claims as it is undisputed that the parties' relationship is governed by contract and plaintiff fails to plead a contractual or statutory basis entitling it to attorney's fees for maintaining the instant action.
With regard to plaintiffs claims against Wishful, it is well established that in order to state a claim for alter-ego liability, a plaintiff is generally required to allege complete domination of the corporation with respect to the transaction attacked and that such domination was used to commit a fraud or wrong against the plaintiff which resulted in plaintiffs injury (see Arjumand v Laguardia Express, 195 A.D.3d 988, 988-89 [2d Dept 2021]). Generally, a claim to pierce the corporate veil is fact-laden (see Matter of WBP Cent. Assoc, LLC v DeCola, 50 A.D.3d 693, 695 [2d Dept 2008]). Alter ego allegations that are conclusory and lack specific factual support cannot form the basis for alter ego liability (Arben Corp: v Durastone, LLC, 186 A.D.3d 599, 600 [2d Dept 2020]). Here, plaintiffs 12 alter ego allegations are wholly conclusory and without any factual support whatsoever. Accordingly, plaintiff s claims against Wishful must be dismissed.
Finally, that branch of the Berger Defendants' motion and plaintiffs cross-motion for an award of costs and/or the imposition of sanctions pursuant to 22 NYCRR 130-1.1 are both denied. Sanctions may be imposed against a party or the attorney for a party for frivolous conduct (see 22 NYCRR 130-1.1[b]). Conduct is frivolous if it is completely without merit in law or fact and'cannot be supported by a reasonable argument for the extension, modification, or reversal of existing law; it is taken to primarily delay or prolong the resolution of the litigation, or harass or maliciously injure another; or it asserts material factual statements that are false (see 22 NYCRR 130-1.1 [c]; see generally Joan 2000, Ltd. v Deco Constr. Corp., 66 A.D.3d 841, 842 [2d Dept 2009]). Here, evidently, neither party has met the foregoing standard as against the other.
Conclusion
For the reasons set forth above, it is hereby
ORDERED that the Berger Defendants' motion to dismiss the complaint (motion sequence 003) is granted as to plaintiffs first, fourth and fifth causes of action and said motion is otherwise denied; it is further
ORDERED that Wishful's motion to dismiss the complaint as against it is granted and the complaint (motion sequence 004) is dismissed as against Wishful only; and it is further 13
ORDERED that the action is severed and continued against the remaining defendants; and it is further
ORDERED that plaintiffs cross-motion for sanctions (motion sequence 005) is denied.
The action is severed accordingly.
This constitutes the decision, order and judgment of the court. 14