Opinion
Index No. 517568/19 Motion Seq. Nos. 6 7
11-01-2023
EMILYA BLANK, EMIL BLANK, VADIM SHUBADEROV AND OLEG EGOROV, Plaintiffs, v. ZHAN PETROSYANTS, ROBERT PETROSYANTS, AKIVA OFSHTEIN, Defendants,
Unpublished Opinion
PRESENT: HON. LEON RUCHELSMAN JUDGE
DECISION AND ORDER
Leon Ruchelsman, Judge
The defendant Akiva Ofshtein and the defendants Zhan and Robert Petrosyants move and cross-move pursuant to CPLR §3212 seeking summary judgement dismissing the lawsuit. The plaintiff has opposed the motions. Papers were submitted by the parties and after reviewing all the arguments this court now makes the following determination.
Findings of Fact
In 2013 the plaintiffs invested sums of money with the defendants to open a restaurant and catering hall in Queens County. The plaintiffs allege they paid money and entered into a shareholder agreement. Pursuant to the agreement the defendant Zhan Petrosyants was a sixty percent owner and the plaintiffs Shubaderov and Egorov were each twenty percent owners. The lawsuit alleges the defendants diverted the funds to other sources depriving them of any return upon their investments. The remaining causes of action include breach of contract by all plaintiffs against Zhan Petrosyants, fraud arid promissory estoppel by all plaintiffs against Robert Petrosyants and legal malpractice by Shubaderov and Egorov against Akiva Ofshtein. The defendants have now moved seeking summary judgement dismissing these remaining causes of action.
Conclusions of Law
Where the material facts at issue in a case are in dispute summary judgment cannot be granted (Zuckerman v. City of New York, 49 N.Y.S.2d 557, 427 N.Y.S.2d 595 [1980]). Generally, it is for the jury, the trier of fact to determine the legal cause of any injury, however, Where only one conclusion may be drawn from the facts then the question of legal cause may be decided by the trial court as a matter of law (Marino v. Jamison, 189 A.D.3d 1021, 136 N.Y.S.3d 324 [2d Dept., 2021).
To succeed on a claim for legal malpractice it must be shown that the attorney failed to act with the "ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession" (Darby &Darby, P.C. v. VSI International, Inc., 95 N.Y.2d 308, 716 N.Y.S.2d 378 [2000]) . Those terms cannot be defined with precision but are rather fact specific and must be judged against the actual representation afforded the client in each particular case. Moreover, the client must further establish that the malpractice was a proximate cause of any loss sustained and the client must also demonstrate 'actual damages' (Prudential Insurance Company v.. Dewey Ballantine, Bushby, Palmer &Wood, 170 A.D.2d 108, 573 N.Y.S.2d 981 [1st Dept., 1991]). The claim cannot be based upon an attorney's choosing of a reasonable, yet Unsuccessful, strategy or course of action (Palazzolo v. Herrick Feinstein, LLP, 298 A.D.2d 372, 75.1 N.Y.S.2d 401 [2d Dept., 2002]) . Moreover, in Lindenman v. Kreitzer, 7 A.D.3d 30, 775 N.Y.S.2d 4 [1stDept,, 2004], the court held "a plaintiff's burden of proof in a legal malpractice action is a heavy one. The plaintiff must prove first the hypothetical outcome of the underlying litigation and, then, the attorney's liability for malpractice in connection with that litigation" (id).
On January 30, 2014 the defendant Zhan Petrosyants entered into, a retainer agreement, with. Akiva Ofshtein.. There is no basis to question the authenticity of the agreement and thus serves as prima facie evidence that only Petrosyants hired Ofshtein. Further, the terms of the agreement, and plaintiff's questions regarding some of its curious provisions, do hot raise any questions whether the plaintiffs were also included as parties to the agreement. Thus, there is no agreement wherein Ofshtein agreed to. represent the plaintiffs. Moreover, plaintiff Emil Blank states in his affidavit that when he purchased the shares he "assumed that Akiva was the general corporate attorney as that was the indication that was conveyed at the meeting so I believed everything I was told and that was prepared for me to sign was legitimate'" (see, Affidavit of Emil Blank, ¶11 [NYSCEF Doc. No. 141]). That statement does not raise any questions of fact whether Ofshtein was Emil's attorney. On the contrary, that statement admits that Emil did not have an attorney and assumed Ofshtein represented his interests as well. There is no basis at all for that assumption. If anything, that assumption merely highlights Emil's naivete and unfamiliarity with the purchase of shares which should have prompted him to secure his own counsel to insure his interests were protected. His failure to do so and his reliance upon the defendants assurances or his own wishful thinking that his interests were being protected does not mean Ofshtein was his counsel in any sense.
Likewise, there is no evidence Ofshtein represented Vadim Shubaderov. Shubaderov testified that like Emil Blank he merely assumed Ofshtein was his counsel although there was no retainer agreement entered into between them (see, Deposition of Vadim Shubaderov., page 38 [NYSCEF Doc. 101]). Further, Shubaderov specifically testified that he did not hire independent counsel to review any agreements he executed. Thus, there is no basis to conclude that any attorney client relationship existed between Shubaderov and Ofshtein. The only evidence presented concerning any attorney client relationship is Shubaderov's affidavit wherein he states that "at all relevant times, defendant Akiva held himself out to me (and all of us present) as a successful business attorney who would help advise the parties and prepare and review any legal documents related to the Prime One Catering venture, which, upon information and belief included the preparation of the Certificate of Incorporation, Shareholder Agreement, Escrow Agreement, and Addendum to the Shareholder Agreement" (see, Affidavit of Vadim Shubaderov, ¶11 [NYSCEF Doc. No. 137]). While such affidavit is obviously self-serving, that fact alone would not bar it's introduction to defeat a motion for summary judgement (Josephson v. Crane Club Inc., 264 A.D.2d 359 [1st Dept., 1999]) . However, the affidavit clearly contradicts his earlier assertion that he merely "understood" Ofshtein was his attorney based upon the circumstances (Schiavone v. Brinewood Rod &Gun Club, 283 A.D.2d 234 [l3t Dept., 2001]). As Schiavone, noted, such "unexplained reversal" is not a firm basis upon which to oppose a summary judgement motion. Rather, such affidavit is merely proffered to avoid the consequences of prior statements and testimonies (Smith v. Taylor, 279 A.D.2d 566 [2d Dept,, 2001]). Of course, where the affidavit does not contradict earlier deposition testimony even if more, detailed, then such affidavit will be accepted (Bosshart v. Pryce, 276 A.D.2d 314 [1st Dept., 2000]).
Since the affidavit is an attempt to alter prior deposition testimony to create questions of fact, it cannot be considered. Consequently, there are no fact to consider whether Ofshtein represented either Blank or Shubaderov, The only evidence supporting th existence of any attorney client relationship is the subjective beliefs of the plaintiffs. Those beliefs fail to raise any questions about the existence of such relationship. Therefore, the motion seeking summary judgement dismissing all claims against Ofshtein is granted.
Turning to the remaining defendants, the plaintiffs allege that both Robert and Zhan Petrosyants misrepresented their expertise in the catering and restaurant industry, failed to open, the restaurant in a timely manner and took funds invested by the plaintiff for other purposes unrelated to the restaurant. The defendants: assert the plaintiffs will be unable to prove these contentions at trial. While that may be true that does not mean the defendants have eliminated all questions of fact.
First, the defendants argue there could have been no reasonable reliance on the part of the plaintiffs because the plaintiffs had a due diligence: requirement to consider all the plans for the restaurant as well as the expertise of the defendants. The case of Ogunsanva v. Langmuir, 2008 WL 4426590 [E.D.N.Y. 2008] is instructive. Tn that case the plaintiff sold a trunk of old photographs and memorabilia without really knowing their true worth to the defendant for $2,000, The defendant feigned the true value of the contents but admitted later he knew they were worth approximately a million dollars. The defendant had promised the plaintiff that if the items were worth more: than they both thought, he would give the plaintiff more money. When he refused the plaintiff sued alleging he was fraudulently induced by the defendant. The defendant sought to dismiss the lawsuit on the grounds there was no reliance since the plaintiff could have, discovered the true value of the contents.. The court rejected that argument noting that "in assessing, whether reliance on allegedly fraudulent misrepresentations is reasonable or justifiable, New York takes a contextual view, focusing on the level of sophistication of the parties, the relationship between them, and the information available at the time of the operative decision" (id). Thus, the plaintiff's reliance on the defendant's alleged misrepresentations could have been reasonable. Likewise, in this case, there are questions of fact whether, considering the relationship between the parties, the plaintiffs could have: discovered the truth about the defendant's expertise as well as the Soundness of the investment. In addition, there are questions whether any omissions regarding the defendant's legal troubles that were not disclosed, constitutes fraud. Surely, the revelation of that information may have compelled the plaintiff's to withdrawn their interest in the investment. Surely, there can be no determination there are no questions of fact regarding any of these issues.
Moreover, there are questions of fact whether the defendants misrepresented their level of expertise sufficient to induce the plaintiffs to invest with them. Those questions of fact have not been eliminated at all. While the statements allegedly made by Robert are few they still raise the question whether they were fraudulent. The defendant asserts that Robert's expertise was "admittedly true" and that therefore no fraud exists see, Affirmation in Support, page 17 (NYSCEF Doc. No. 112]). However, there has been no admission in this regard and consequently, questions of fact remain whether the defendants committed fraud.
Turning to the estoppel claim, to establish a cause of action for promissory estoppel it must be shown that the defendant made a clear and unambiguous promise upon which the plaintiff reasonably relied to his or her detriment (Skillgames LLC v. Brody, 1 A.D.3d 247, 767 N.Y.S.2d 418 [1st Dept., 2003]). Again, there are questions of fact- whether, the promises the, defendants made .concerning the restaurant- as well as the -use. .of funds were specific and were relied upon by the plaintiffs.
Concerning the breach of contract claim, the defendants argue, the claim cannot be pursued against Emilya since she suffered no damages. Thus, there are surely questions of fact whether the contract was breached by Zhan as enumerated. Concerning damages, while there is testimony Emilya Blank did not invest her own funds she was listed as a shareholder of the corporation. There are surely questions of fact whether diverting funds away from the corporation caused her any damages.
Further, concerning Shubaderov, there was no admission that he voluntarily forfeited his investment. Shubaderov testified at a deposition and when asked whether the. defendants were permitted to withdraw the funds he invested or whether they should have accounted for the funds he responded "they should have accounted for the money" (see, Deposition of Vadim Shubaderov, page 48 [NYSCEF Doc. No. 128]). There was follow-up questioning concerning the nature of such request for an accounting. In any event, that statement was not an admission the money was forfeited. Indeed, if the money was forfeited there would be no need for an accounting. Clearly., Shubaderov believed the money was improperly taken and was done so without his authority. His reference to an accounting did not necessarily demand a cause of action for an accounting but ah acknowledgment the funds were improperly taken and they should be accounted' for as that term is colloquially understood. At the very least there are questions in this regard. Therefore, the motions seeking to dismiss the breach Of contract claim are denied.
In conclusion, the claims of fraud may only be pursued by plaintiffs Emil Blank and Vadim Shubaderov against defendant Robert Petrosyants. The promissory estoppel claim may only be pursued by plaintiff Vadim Shubaderov against Robert Petroysants. The breach of contract claim may be pursued by plaintiffs Emilya Blank and Vadim Shubaderov against Zhan Petroysants.
So ordered.