Summary
affirming denial of a motion to dismiss where "the appellants were not in contractual privity with the individual plaintiffs, [but] under the circumstances of this case, their relationship can be said to be so close as to approach that of privity"
Summary of this case from In re Amaranth Natural Gas Commodities LitigationOpinion
Argued February 20, 2001.
April 2, 2001.
In an action, inter alia, to recover damages for legal malpractice and breach of fiduciary duty, the defendant Whitman Breed Abbott Morgan and the individual defendant partners thereof appeal from so much of an order of the Supreme Court, Westchester County (Coppola, J.), entered May 26, 1999, as denied those branches of their motion which were to dismiss the first, second, third, seventh, tenth, eleventh, sixteenth, and eighteenth causes of action insofar as asserted against them with respect to transactions alleged to have occurred on or after January 30, 1991, the defendant Whitman Ransom and the individual defendant partners thereof separately appeal from so much of the same order as denied those branches of their separate motion which were for the same relief with respect to them, and the defendant Vernon G. Browne separately appeals from the same order. The appeal brings up for review so much of an order of the same court, entered October 8, 1999, as, upon granting the motion of the defendant Whitman Ransom and the individual defendant partners thereof to reargue, adhered to the prior determination (see, CPLR 5517[b]).
Gilbert, Segall and Young, LLP, New York, N.Y. (Richard F. Markert of counsel), for appellants Whitman Breed Abbott Morgan and the individual partners thereof, and Whitman Ransom and the individual partners thereof (separate briefs filed [Keane Beane, P.C., White Plains, N.Y. (Richard L. O'Rourke of counsel), on the brief for appellants Whitman Breed Abbott Morgan and the individual partners thereof; Plunkett Jaffe, P. C., White Plains, N.Y. (Kevin J. Plunkett of counsel), on the brief for appellants Whitman Ransom and the individual partners thereof]).
Warner Joselson, New York, N.Y. (Jonathon D. Warner and Karl E. Scheuerman of counsel), for appellant Vernon G. Browne.
Frankel Abrams, New York, N.Y. (Sandor Frankel, Stuart E. Abrams, and Linda Donahue of counsel), for respondents.
Before: LAWRENCE J. BRACKEN, P.J., DAVID S. RITTER, GLORIA GOLDSTEIN, SANDRA J. FEUERSTEIN, JJ.
DECISION ORDER
ORDERED that the appeal by the defendant Vernon G. Browne is deemed withdrawn pursuant to letter dated February 16, 2001; and it is further,
ORDERED that the appeal by the defendant Whitman Ransom and the individual defendant partners thereof from the order entered May 26, 1999, is dismissed, as that order was superseded by the order entered October 8, 1999, with regard to those defendants; and it is further,
ORDERED that the order entered May 26, 1999, is affirmed insofar as appealed from by the defendant Whitman Breed Abbott Morgan and the individual defendant partners thereof; and it is further,
ORDERED that the order entered October 8, 1999, is affirmed insofar as reviewed; and it is further,
ORDERED that the plaintiffs are awarded one bill of costs.
The plaintiffs allege, inter alia, that the defendant law firms and the individual defendant partners thereof (hereinafter collectively the appellants), along with the defendant Vernon G. Browne, who is the plaintiffs' brother-in-law, wasted and looted the $100,000,000 family fortune. Purporting to sue individually and on behalf of the family businesses, the plaintiffs claim that between 1984 and 1995, the defendants committed professional malpractice and/or breached their fiduciary duties and/or unjustly enriched themselves, inter alia, by diverting the family wealth, in the form of real property and cash, to finance real estate ventures in which they held financial interests.
The Supreme Court properly applied a six-year Statute of Limitations to the plaintiffs' legal malpractice claims (see, Brothers v. Florence, 95 N.Y.2d 290; Santulli v. Englert, Reilly McHugh, 78 N.Y.2d 700). While the appellants were not in contractual privity with the individual plaintiffs, under the circumstances of this case, their relationship can be said to be "so close as to approach that of privity" (Prudential Ins. Co. v. Dewey, Ballantine, Bushby, Palmer Wood, 80 N.Y.2d 377, 382; see, Ossining Union Free School Dist. v. Anderson LaRocca Anderson, 73 N.Y.2d 417, 424; Parrott v. Coopers Lybrand, 95 N.Y.2d 479; State of California Public Employees' Retirement Sys. v. Shearman Sterling, 95 N.Y.2d 427; Tambrands, Inc. v. Lockwood Greene Engrs., 178 A.D.2d 406).
Contrary to the contention of the defendant Whitman Breed Abbott Morgan and the individual defendant partners thereof, the plaintiff 6D Farm Corporation (hereinafter 6D), a partner in Benedict Dairy Farms, has standing to maintain its claims. Generally, "a partnership cause of action belongs only to the partnership itself or to the partners jointly, and * * * an individual member of the partnership may only sue and recover on a partnership obligation on the partnership's behalf" (Shea v. Hambro America Incorporated, 200 A.D.2d 371, 372; see, Bay Shore Family Partners v. Foundation of Jewish Philanthropies, 270 A.D.2d 374; Stevens v. St. Joseph's Hosp., 52 A.D.2d 722). 6D does not dispute that the injuries complained of are essentially injuries to the partnership, but correctly asserts that where, as here, it is alleged that the other equal partner participated in some wrongdoing with a third party, an individual partner is permitted to sue in its individual capacity and recover its own damages (see, Mannaberg v. Herbst, 267 App. Div. 818, affd 293 N.Y. 657; Millard v. Newmark Company, 24 A.D.2d 333; see also, Franco v. English, 210 A.D.2d 630).
The Supreme Court properly concluded that the individual plaintiffs have standing to assert claims for diminution of the value of their stock in Duke Benedict, Inc., and Adron, Inc., since the wrongs alleged were not only wrongs to the corporations, but were violations of an independent fiduciary duty owed by the appellants to the plaintiff stockholders (see, General Rubber Co. v. Benedict, 215 N.Y. 18; Matter of Schulman, 165 A.D.2d 499).
Accepting all factual allegations of the complaint as true, as the court must on a motion to dismiss, and according the plaintiffs the benefit of every possible inference (see, CPLR 3211; Cron v. Hargro Fabrics, 91 N.Y.2d 362; Leon v. Martinez, 84 N.Y.2d 83), we find that the complaint states legally cognizable claims, inter alia, to recover damages for legal malpractice, breach of fiduciary duty, and unjust enrichment.
The appellants' remaining contentions are without merit.