Opinion
09 Civ. 9878 (SAS).
May 28, 2010
For Plaintiffs: Joy Hochstadt, Esq. (former counsel), Joy Hochstadt P.C., New York, New York.
For Defendants Speiser Krause LLC and Ken Nolan Esq.: Barry Jacobs, Esq., Shari Debra Sckolnick, Esq., Abrams, Gorelick, Friedman Jacobson, P.C., New York, New York.
For Defendants Kohn Swift Graf LLC and Robert Swift, Esq.:
For Defendants Nagel Rice LLC and Jay Rice, Esq.: Lauren Jill Rocklin, Esq., Shelowitz Associates, PLLC, New York, New York.
OPINION AND ORDER
I. INTRODUCTION
In November 2000, a ski train fire in Kaprun, Austria killed 155 individuals and left twelve survivors (the "Ski Train Fire"). In addition to a mediation that took place in Austria, American and foreign survivors and/or relatives of those who died in the fire brought multiple lawsuits in federal court against numerous defendants (the " In re Ski Train Litigation"). The foreign plaintiffs in that action now bring claims for legal malpractice, negligence, breach of fiduciary duty, breach of contract, fraud, and undisclosed conflicts of interest against certain counsel in the In re Ski Train Litigation. Defendants have moved to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the reasons that follow, defendants' motion is granted and plaintiffs' claims are dismissed with prejudice.
Plaintiffs also brought a claim for wrongful withholding of Plaintiffs' files seeking "(i) immediate return of their files, (ii) immediate production of the documents [requested], and (iii) attorneys' fees, interest and costs related to recovery of their files." Complaint ("Compl.") ¶ 227. At a prior hearing held before this Court, defendants stated that they had withheld those files because they had not received authorizations from their former clients to release them to Plaintiffs' counsel, but would do so upon receiving such authorizations. Because defendants were justified in withholding Plaintiffs' files absent an authorization to release them, Plaintiffs' request for attorney's fees, interest and costs related to recovery of their files is denied. This cause of action is now moot.
II. FACTS
All facts are drawn from the Complaint and are presumed to be true for the purpose of this motion. Additional undisputed facts have also been drawn from prior opinions and publicly filed court documents in the In re Ski Train Litigation for which I have taken judicial notice. See Lefkowitz v. Bank of N.Y., 676 F. Supp. 2d 229, 249 (S.D.N.Y. 2009) ("Judicial notice may encompass the status of other lawsuits, including in other courts, and the substance of papers filed in those actions.").
Plaintiffs in the instant action identify themselves in three groups: (1) the Kaprun Victim Family Plaintiffs, who are family members of some of the 155 persons killed in the Kaprun Disaster; (2) the Kaprun Survivor Plaintiffs, who were among the twelve persons who survived the Kaprun Disaster; and (3) the Kaprun Survivor Family Plaintiffs (collectively, "Plaintiffs"). In January 2001, four of the six defendants to this action — Nagel Rice LLC ("Nagel"), Jay J. Rice, Kohn Swift Graf LLC ("Kohn"), and Robert Swift — filed a class action in In re Ski Train Litigation. During the summer of 2003, the remaining two defendants to this action — Speiser Krause ("Speiser") and Ken Nolan — joined Nagel, Rice, Kohn, and Swift (collectively, "defendants") as proposed class counsel. In 2002, the Judicial Panel on Multidistrict Litigation assigned all related actions to this Court for coordinated or consolidated pretrial proceedings. In October 2003, this Court certified an opt-in class defined as "all heirs, beneficiaries and personal representatives' of all individuals who died in the fire who consent to inclusion" (the "Opt-In Class") and appointed defendants as class counsel. In their capacity as class counsel, defendants represented all persons included in the Opt-In Class — American and foreign.
See Compl. ¶ 2 (listing those plaintiffs by name).
See id. ¶ 3 (listing those plaintiffs by name).
See id. ¶ 4 (listing those plaintiffs by name).
See id. ¶¶ 28-29.
See id. ¶ 37.
See id. ¶ 33.
In re Ski Train Fire in Kaprun, Austria on November 11, 2000, 220 F.R.D. 195, 199 (S.D.N.Y. 2003), rev'd on other grounds sub nom., Kern v. Siemens Corp., 393 F.3d 120 (2d Cir. 2004) (quotation marks omitted) (emphasis added). Accord Compl. ¶ 38.
See Compl. ¶¶ 39, 41-45.
Also in 2003, the Republic of Austria established the Kaprun Commission to investigate the Ski Train Fire. The Kaprun Commission later became involved in attempting to mediate a potential global settlement of all claims of all victims and survivors. The purpose of the mediation was to establish a fair, equitable, and non-discriminatory amount to be paid to each Ski Train Fire victim, survivor, and their families. Involvement in the Kaprun Commission was voluntary for all participants, including claimants and companies involved in the Ski Train Fire.
See id. ¶ 97.
See id. ¶ 99.
See id. ¶ 107.
See id. ¶ 102.
On December 20, 2004, the Second Circuit decertified the Opt-In Class in the In re Ski Train Litigation, but "explained that [t]he Kaprun Victim Family Plaintiffs' claims could have been filed and could still be re-filed as an opt-out class." Defendants petitioned the United States Supreme Court for certiorari, but their petition was denied in May 2005. Instead of refiling the class as an opt-out class, defendants ceased pursuing the foreign plaintiffs' claims in the In re Ski Train Litigation in favor of pursuing settlement with the Kaprun Commission.
See Compl. ¶¶ 60-61. "Rule 23(c) contains a so-called 'opt out' requirement, mandating that members of a class certified under Rule 23(b)(3) be afforded an opportunity to 'request exclusion' from that class. The language of Rule 23 does not, however, require members of any class affirmatively to opt into membership." Kern, 393 F.3d at 124.
See Kern v. Siemens, 125 S. Ct. 2272 (2005).
See Compl. ¶¶ 63-65.
Beginning in late 2005, attorneys Edward Fagan, James Lowy, and Robert Hantman appeared on behalf of the foreign plaintiffs and accepted primary responsibility for their claims in the In re Ski Train Litigation. Defendants never formally withdrew as Plaintiffs' counsel in the In re Ski Train Litigation. Neither Fagan and his co-counsel, nor defendants, ever re-filed Plaintiffs' claims as an opt-out class action — a right that ultimately expired under the statute of limitations (although it is unclear exactly when). Plaintiffs assert that defendants intentionally failed to re-file because defendants believed they would recover a greater — unspecified — personal benefit if the matter settled through the Kaprun Commission. In 2007, the Plaintiffs' claims in the In re Ski Train Litigation were dismissed on the ground of forum non conveniens. Final judgment was issued on June 16, 2008, and the decision was affirmed on appeal on December 21, 2009.
See 11/2/05 In re Ski Train Litigation Hearing Transcript, Ex. C to the Declaration of Brett A. Scher, defendants' counsel, in Support of Motion to Dismiss ("Scher Decl.") at 4:20-23 (The Court: "Mr. Fagan, is it correct that there's no one else representing the foreign plaintiffs on [their motion to intervene] but you?" . . . Mr. Fagan "Yes, your Honor."); 4/20/06 Letter from Fagan to Court in In re Ski Train Litigation, Ex. D to Scher Decl., at 1 (stating that he is "plaintiffs' counsel" in the actions brought by the foreign plaintiffs and advising that Lowy and Hantman would be filing notices of appearance); 6/15/06 Letter from Hantman to Court in In re Ski Train Litigation, Ex. E to Scher Decl., at 1-2 (identifying himself as co-counsel with Fagan for the non-U.S. plaintiffs and referring to defendants as "former class counsel"); 8/30/06 Case Management Scheduling Order # 2 in In re Ski Train Litigation, Ex. N to Scher Decl. at 1 (stating that the foreign plaintiffs were represented by Fagan, Hantman, and Lowy); see also Affidavit of James F. Lowy in Support of Order to Show Cause (With Temporary Restraints), and Discharge of the Temporary Restraints Imposed by the Supreme Court ("Lowy Aff."), Fagan v. Lowy, No. 07 Civ. 10293 (S.D.N.Y.), Ex. B to Scher Decl., ¶¶ 3, 4, 5; Declaration of Dr. Bernd Geier, plaintiff in this action and in In re Ski Train Litigation, Ex. F to Scher Decl., ¶¶ 4, 13, 20, 21; Affidavit of Dr. Ivo Greiter, plaintiff in In re Ski Train Litigation, Ex. J to Scher Decl., ¶¶ 9, 11; Declaration of Dr. Herwig Hasslacher, plaintiff in In re Ski Train Litigation, Ex. K to Scher Decl., ¶ 4; Declaration of Dr. Ivo Greiter Dr. Toichiro Kigawa, plaintiffs in In re Ski Train Litigation, Ex. L to Scher Decl., ¶ 4. Because each of these documents is part of the public record in the In re Ski Train Litigation, I take judicial notice of them. See Lefkowitz, 676 F. Supp. 2d at 249. I have not taken judicial notice of those documents submitted by defendants that are not part of any public court record or referenced in the Complaint. See Exs. A, I to the Scher Decl.
See Compl. ¶ 77.
See id. ¶¶ 79, 86.
See id. ¶¶ 66, 91.
See id. ¶ 93; In re Ski Train, 499 F. Supp. 2d 437, 452 (S.D.N.Y. 2007).
See Geier v. Omniglow Corp., 357 Fed. Appx. 377 (2d Cir. Dec. 21, 2009).
Although the Complaint notably lacks clarity on this point, it can be deduced that at some point in 2007 or 2008, some or all of Plaintiffs accepted the settlements offered by the Kaprun Commission. After Plaintiffs accepted settlement, they discovered that defendants and the members of the Kaprun Commission had concealed and withheld evidence and facts, misrepresented settlement and release documents, failed to provide Plaintiffs with accurate accountings of payments made to third parties which reduced the settlement amount available, failed to establish proper procedures by which individuals could rescind participation in the Kaprun Commission and reject potential "settlement payments," and failed to take steps to protect Plaintiffs.
See Compl. ¶ 104.
In 2008, defendants sent invoices to the Kaprun Victim Family Plaintiffs for services defendants claim they rendered on those Plaintiffs' behalf during the In re Ski Train Litigation and the Kaprun Commission's mediation process. On December 1, 2009, Plaintiffs instituted the instant litigation against defendants seeking for each alleged cause of action "(i) compensatory damages in the amount of five million dollars per Plaintiff; (ii) exemplary, special and/or punitive damages in the amount of ten million dollars per Plaintiff; and (iii) attorneys fees, interests and costs of suit."
See id. ¶ 15 n. 8; 2008 Invoices, Ex. H to Scher Decl. (incorporated into the Complaint by reference).
Compl. ¶¶ 153, 159, 177, 189, 215, 220.
III. APPLICABLE LAW
A. Rule 12(b)(6) Motion to Dismiss
"A cause of action for legal malpractice poses a question of law which can be determined on a motion to dismiss." In deciding a motion to dismiss pursuant to Rule 12(b)(6), the court must "accept as true all of the factual allegations contained in the complaint" and "draw all reasonable inferences in [the] plaintiff[s'] favor." However, the court need not accord "[l]egal conclusions, deductions or opinions couched as factual allegations . . . a presumption of truthfulness." To survive a Rule 12(b)(6) motion to dismiss, the allegations in the complaint must meet a standard of "plausibility." A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Plausibility "is not akin to a probability requirement," rather plausibility requires "more than a sheer possibility that a defendant has acted unlawfully."
Kirk v. Heppt, 532 F. Supp. 2d 586, 591 (S.D.N.Y. 2008) (citing Achtman v. Kirby, McInerney Squire, LLP, 464 F.3d 328, 337 (2d Cir. 2006)).
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 572 (2007). Accord Rescuecom Corp. v. Google Inc., 562 F.3d 123, 127 (2d Cir. 2009).
Ofori-Tenkorang v. American Int'l Group, Inc., 460 F.3d 296, 298 (2d Cir. 2006).
In re NYSE Specialists Sec. Litig., 503 F.3d 89, 95 (2d Cir. 2007) (quotation marks omitted).
Twombly, 550 U.S. at 564.
Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quotation marks omitted).
Id. (quotation marks omitted).
When determining the sufficiency of a claim under Rule 12(b)(6), the court is normally required to consider only the allegations in the complaint. However, the court is allowed to consider documents outside the pleading if the documents are integral to the pleading or subject to judicial notice.
See Global Network Commc'ns, Inc. v. City of N. Y., 458 F.3d 150, 156 (2d Cir. 2006).
B. Legal Malpractice
"'In a diversity action based on attorney malpractice, state substantive law, here that of New York, applies.'" "A plaintiff must establish the following elements for a claim of legal malpractice under New York State law (1) an attorney-client relationship, (2) attorney negligence (3) that is the proximate cause of a loss, and (4) actual damages."
Nordwind v. Rowland, 584 F.3d 420, 429 (2d Cir. 2009) (quoting Rubens v. Mason, 527 F.3d 252, 254 (2d Cir. 2008)).
Stonewell Corp. v. Conestoga Title Ins. Co., 678 F. Supp. 2d 203, 208 (S.D.N.Y. 2010) (citing Allianz Ins. Co. v. Lerner, 416 F.3d 109, 118 (2d Cir. 2005)). Accord Achtman, 464 F.3d at 337.
An attorney-client relationship is a necessary element to a legal malpractice claim. "'It is well established that, with respect to attorney malpractice, absent fraud, collusion, malicious acts, or other special circumstances, an attorney is not liable to third parties, not in privity, for harm caused by professional negligence.'" In order to establish negligence in a legal malpractice action, "a party must aver that an attorney's conduct 'fell below the ordinary and reasonable skill and knowledge commonly possessed by a member of the profession.'" "To establish the elements of proximate cause and actual damages for a claim of legal malpractice, the plaintiff must show that 'but for the attorney's negligence, what would have been a favorable outcome was an unfavorable outcome.'" "The failure to establish proximate cause requires dismissal of the legal malpractice action, regardless of whether it is demonstrated that the attorney was negligent."
Moran v. Hurst, 822 N.Y.S.2d 564, 566 (2d Dep't 2006) (quoting Rovello v. Klein, 757 N.Y.S.2d 496, 496 (2d Dep't 2003)). Accord Crews v. County of Nassau, 612 F. Supp. 2d 199, 206 (E.D.N.Y. 2009) ("'It makes sense also to limit an attorney's malpractice liability to non-clients, because absent contractual privity or a relationship approaching privity, the 'duty' element of a negligence claim is missing.'") (quoting LNC Invs., Inc. v. First Fid. Bank, N.A., 935 F. Supp. 1333, 1351 (S.D.N.Y. 1996)).
Achtman, 464 F.3d at 337 (quoting Grago v. Robertson, 49 A.D.2d 645, 646, 370 N.Y.S.2d 255 (3d Dep't 1975)).
Stonewell Corp., 678 F. Supp. 2d at 209 (quoting Zarin v. Reid Priest, 585 N.Y.S.2d 379, 381 (1st Dep't 1992)).
Schwartz v. Olshan Grundman Frome Rosenzweig, 753 N.Y.S.2d 482, 486 (1st Dep't 2003).
C. Statute of Limitations
"Where the dates in a complaint show that an action is barred by a statute of limitations, a defendant may raise the affirmative defense in a pre-answer motion to dismiss. Such a motion is properly treated as a Rule 12(b)(6) motion. . . ." Because such a motion falls under Rule 12(b)(6), a "[c]ourt may not look outside the complaint and 'any documents that are either incorporated into the complaint by reference or attached to the complaint as exhibits.'"
Ghartey v. St. John's Queens Hosp., 869 F.2d 160, 162 (2d Cir. 1989).
Morris v. People's Rep. of China, 478 F. Supp. 2d 561, 566 (S.D.N.Y. 2007) (quoting Blue Tree Hotels Inv. (Can.), Ltd. v. Starwood Hotels Resorts Worldwide, Inc., 369 F.3d 212, 217 (2d Cir. 2004)).
New York's statute of limitations for legal malpractice is three years, regardless of whether the underlying theory is based in contract or tort. The claim accrues "when all the facts necessary to the cause of action have occurred and an injured party can obtain relief in court." The claim accrues "even if the aggrieved party is then ignorant of the wrong or injury."
Ackerman v. Price Waterhouse, 84 N.Y.2d 535, 541 (1994). Accord Arnold v. KPMG LLP, 543 F. Supp. 2d 230, 235 (S.D.N.Y. 2008).
Ackerman, 84 N.Y.2d at 541. Accord Arnold, 543 F. Supp. 2d at 235.
D. Common Law Fraud
"Under New York law, to state a claim for fraud a plaintiff must demonstrate: (1) a misrepresentation or omission of material fact; (2) which the defendant knew to be false; (3) which the defendant made with the intention of inducing reliance; (4) upon which the plaintiff reasonably relied; and (5) which caused injury to the plaintiff." Common law fraud claims must be pled with particularity in accordance with the requirements set forth in Rule 9(b). To allege a material misrepresentation in compliance with Rule 9(b) of the Federal Rules of Civil Procedure, a complaint must "(1) detail the statements (or omissions) that the plaintiff contends are fraudulent, (2) identify the speaker, (3) state where and when the statements (or omissions) were made, and (4) explain why the statements (or omissions) are fraudulent."
Where, as here, a fraud claim is asserted in connection with charges of professional malpractice, it is sustainable only to the extent that it is premised upon one or more affirmative, intentional misrepresentations — that is, something more egregious than mere concealment or failure to disclose [one's] own malpractice which have caused additional damages, separate and distinct from those generated by the alleged malpractice.
Wynn v. AC Rochester, 273 F.3d 153, 156 (2d Cir. 2001).
See Matsumura v. Benihana Nat'l Corp., 542 F. Supp. 2d 245, 251 (S.D.N.Y. 2008).
Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co. of New York, 375 F.3d 168, 187 (2d Cir. 2004) (quotation marks omitted).
White of Lake George Inc. v. Bell, 674 N.Y.S.2d 162, 163 (3d Dep't 1998) (quotation marks omitted). Accord St. Alexander's Church v. McKenna, 742 N.Y.S.2d 165, 167 (3d Dep't 2002) (holding that where a fraud claim is asserted in connection with a claim for professional malpractice, the plaintiff must also allege that the attorney "failed to pursue an available remedy which would have corrected or alleviated the condition caused by the malpractice had it not been diverted from doing so by its reliance upon [the] defendant's alleged misrepresentation").
E. Duplicative Claims
Under New York law, where a claim for negligence, breach of fiduciary duty, breach of contract, or failure to disclose a conflict of interest are premised on the same facts and seek the identical relief as a claim for legal malpractice, these claims are considered "redundant and should be dismissed."
Nordwind, 584 F.3d at 432-33 (quotation marks omitted). Accord Amadasu v. Ngati, No. 05 Civ. 2585, 2006 WL 842456, at *9 (E.D.N.Y. Mar. 27, 2006) (dismissing plaintiff's claims for breach of contract, breach of fiduciary duty, negligent misrepresentation, negligent performance, and gross negligence as duplicative).
F. Leave to Amend
Rule 15(a)(2) of the Federal Rules of Civil Procedure provides that other than amendments as a matter of course, "a party may amend its pleading only with the opposing party's written consent or with the court's leave." Although "[t]he Court should freely give leave when justice so requires," it is "within the sound discretion of the district court to grant or deny leave to amend." "When a motion to dismiss is granted, the usual practice is to grant leave to amend the complaint." Where plaintiff inadequately pleads a claim and cannot offer additional substantive information to cure the deficient pleading, granting leave to replead is futile.
Slayton v. American Express Co., 460 F.3d 215, 226 n. 10 (2d Cir. 2006) (quotation marks omitted).
McCarthy v. Dun Bradstreet Corp., 482 F.3d 184, 200 (2d Cir. 2007).
Hayden v. County of Nassau, 180 F.3d 42, 53 (2d Cir. 1999).
See Cuoco v. Moritsugu, 222 F.3d 99, 112 (2d Cir. 2000).
IV. DISCUSSION
1. Attorney-Client Relationship
A. Legal Malpractice
The Kaprun Survivor Plaintiffs and the Kaprun Survivor Family Plaintiffs have failed to allege that privity existed with defendants at any time and, thus, have failed to plead an attorney-client relationship with defendants in connection with either the In re Ski Train Litigation or the Kaprun Commission. With regard to the In re Ski Train Litigation, defendants represented the Plaintiffs in the Opt-In Class only. That class was defined to include only the individuals and family members of individuals "who died in the fire." The Kaprun Survivor Plaintiffs and the Kaprun Survivor Family Plaintiffs groups are comprised of persons who survived the Ski Train Fire and their family members. As even the Complaint acknowledges, these Plaintiffs are necessarily excluded from that class definition. Therefore, these Plaintiffs lack the ability to bring an actionable claim for legal malpractice against defendants.
See Compl. ¶¶ 39, 41-45.
In re Ski Train, 220 F.R.D. at 199 (emphasis added).
See Compl. ¶¶ 3, 4.
See id. ¶ 24 n. 1 ("The Retainer Agreements were originally only as between Defendants Nagel, Rice, Kohn and Swift on the one hand and The Kaprun Victim Family Plaintiffs on the other hand. In 2003, [t]he Retainer Agreements were expanded to also include Defendants Speiser and Nolan.") (emphasis added); id. ¶ 65 ("Defendants chose to attempt to try [to] settle the claims as quickly as possible, notwithstanding their obligations to The Kaprun Victim Family Plaintiffs.") (emphasis added); id. ¶ 66 ("Defendants had a financial conflict of interest with their own clients — the Kaprun Victim Family Plaintiffs — and put their personal and financial interests ahead of their clients."); id. ¶¶ 39, 41-43, 64, 65, 94, 117.
With regard to the Kaprun Commission, the Complaint only claims an attorney-client relationship between defendants and the Kaprun Victim Families, thereby excluding by its own definition the Kaprun Survivor Plaintiffs and the Kaprun Survivor Family Plaintiffs. However, even Plaintiffs' assertion that defendants represented the Kaprun Victim Families for purposes of the Kaprun Commission lacks plausibility. Specifically, the Complaint continually refers to the Kaprun Victim Families as defendants' "former clients" during the time that defendants were working with the Kaprun Commission to achieve a resolution. Plaintiffs fail to explain how defendants could have been in privity with the Kaprun Victim Families and committed malpractice against them if defendants no longer represented them at the time. Thus, all Plaintiffs' claims for attorney malpractice based on representation before the Kaprun Commission are dismissed for lack of privity and only the Kaprun Victim Family Plaintiffs' claim for malpractice based on the In re Ski Train Litigation remains. 2. Statute of Limitations for Malpractice Stemming from the In re Ski Train Litigation
Id. ¶ 117 ("On information and belief, Defendants provided information about how to differentiate between the claims of the US victims and the claims of Plaintiffs their former clients — The Kaprun Victim Families — the foreign victims, and/or the survivors.") (emphasis added); id. ¶ 150 ("With regard to The Kaprun Commission, Defendants treated the claims, rights and interests of The Kaprun Victim Family Plaintiffs, The Kaprun Survivor Plaintiffs, The Kaprun Survivor Plaintiffs, The Kaprun Survivor Family Plaintiffs and Defendants' clients — the U.S. Kaprun victim families, as well as other Kaprun victims, survivors, and/or claimants, in an un-fair, inequitable and discriminatory way.") (emphasis added).
Plaintiffs appear to contend that they need not demonstrate privity for any malpractice claim because the defendants generally owed Plaintiffs a fiduciary duty that continued until sometime in 2008. See Memorandum of Law in Opposition to the Motion to Dismiss the Complaint ("Pl. Opp.") at 17-19. Because this argument ignores well-established law, it is summarily rejected.
This action was filed on December 1, 2009. Because the New York statute of limitations for attorney malpractice is three years, any alleged malpractice that occurred prior to December 1, 2006 is time-barred. Plaintiffs have not alleged any negligent conduct by defendants that occurred after this date with regard to the In re Ski Train Litigation. Therefore, Kaprun Victim Family Plaintiffs' claims are time-barred and are dismissed.
Even if the Kaprun Survivor Plaintiffs and the Kaprun Survivor Family Plaintiffs had been in privity with defendants with regard to the In re Ski Train Litigation, their malpractice claims would be similarly time-barred.
Rather than attempting to refute the conclusion that their claims are time-barred under the three year statute of limitations, Plaintiffs assert that they are entitled to a six year statute of limitations because they assert breach of fiduciary duty claims that sound in fraud. Only where a complaint "alleges all the necessary elements of fraud, as well as malpractice . . . is the six year statute of limitations for fraud actions [] applicable." For the reasons discussed below, this argument is unavailing as Plaintiffs' allegations of fraud and breach of fiduciary duty fall woefully short.
See id. at 14-17.
76 N.Y. Jur. 2d Malpractice § 61 (emphasis added). See also Tenamee v. Schmukler, 438 F. Supp. 2d 438, 446 (S.D.N.Y. 2006) (holding that where plaintiff's allegations of fraud "amount[ed] to nothing but a thinly disguised claim for legal malpractice . . . [plaintiff] cannot benefit from the longer fraud statute of limitations when he is asserting what is actually a legal malpractice claim").
Moreover, Plaintiffs provide for support only an unreported Second Circuit case, Weisshaus v. Mermelstein. Not only is Weisshaus entirely mischaracterized by Plaintiffs, it is wholly inapplicable. Rather than applying a six year statute of limitations to a breach of fiduciary duty claim against an attorney as described by Plaintiffs, the Second Circuit in Weisshaus actually addresses whether a district court properly dismissed a complaint on the grounds of collateral estoppel. There is no analysis in the Weisshaus decision regarding the statute or limitations for attorney malpractice, breach of fiduciary duty or fraud claims. Accordingly, the three year statute of limitations applies to bar Plaintiffs' claims.
See Pl. Opp. at 16 (citing Weisshaus, 94 Fed. Appx. 869, 870 (2d Cir. 2004).
See id.
See Weisshaus, 94 Fed. Appx. at 870.
See id.
3. Proximate Cause
Even if Plaintiffs had demonstrated an attorney-client relationship and that they had filed this action within the applicable three-year statute of limitations, Plaintiffs' claims for attorney malpractice still fail because they cannot demonstrate that defendants' alleged malpractice proximately caused Plaintiffs' injuries in the In re Ski Train Litigation. The publicly filed court documents clearly show that defendants ceased representing Plaintiffs in late 2005, or, at the very latest, early 2006. Thereafter, any alleged malpractice that may have been committed could have been rectified by Plaintiffs' successor counsel — Fagan, Hantman, and Lowy. For example, Plaintiffs assert that defendants caused them harm by failing to move to certify an opt-out class after the Second Circuit decertified the Opt-In Class. However, defendants no longer represented Plaintiffs at that time and could not have moved on their behalf to certify an opt-out class. Conversely, Fagan, Hantman, and Lowy had every opportunity to refile as an opt-out class, but failed to do so. Defendants cannot be held liable for those attorneys' alleged mistakes.
See supra n. 18.
See Katz v. Herzfeld Rubin, P.C., 853 N.Y.S.2d 104, 105-06 (2d Dep't 2008) (rejecting plaintiffs' malpractice claims where plaintiffs had discharged defendants and hired new counsel who then had a sufficient opportunity to protect the plaintiffs' rights by pursuing any remedies it deemed appropriate on their behalf).
Citing no case law, Plaintiffs contend that because defendants never formally withdrew as Plaintiffs' counsel, defendants' representation continued until 2008 when defendants submitted invoices requesting payment for their services, thus rendering them liable for the successor counsel's failure to re-file. Plaintiffs' position misstates New York law. "As between attorney and client, no special formality is required to effect the discharge of the attorney. 'Any act of the client indicating an unmistakable purpose to sever relations is enough.'" Here, after 2005, Fagan, Lowy, and Hantman filed court documents and appeared on Plaintiffs' behalf. In each document or appearance, they asserted that they were Plaintiffs' exclusive counsel and/or referred to defendants as Plaintiffs' former counsel. These representations sufficiently indicated to defendants that the attorney-client relationship with defendants was severed and renders implausible any conclusion that defendants' conduct proximately caused Plaintiffs' alleged harm. As a result, Plaintiffs' malpractice claims are dismissed.
See Pl. Opp. at 16.
Hanlin v. Mitchelson, 794 F.2d 834, 842 (2d Cir. 1986) (quoting Costello v. Bruskin, 395 N.Y.S.2d 116, 117 (2d Dep't 1977)). Accord Holmberg, Galbraith, Holmberg, Orkin Bennett v. Koury, 575 N.Y.S.2d 192, 194 (3d Dep't 1991) (holding that a law firm did not commit malpractice when it failed to apply for a rehearing and failed to advise the client of the time limits for making such an application where the law firm considered its role as the client's attorney to have ended with the judgment, and the client's pro se application for permission to file a late application for rehearing was granted).
See supra n. 18.
See Flutie Bros. v. Hayes, No. 04 Civ. 4187, 2006 WL 1379594, at *6-*7 (S.D.N.Y. May 16, 2006) (dismissing plaintiffs' legal malpractice claim for failure to sufficiently allege proximate cause where plaintiff did no more than allege what defendants " should have done," "d[id] not in any way demonstrate that these failures would have changed" the outcome, and subsequent counsel had adequate time to rectify any damage that defendants' alleged negligence might have caused); Golden v. Cascione, Chechanover Purcigliotti, 729 N.Y.S.2d 140, 141 (1st Dep't 2001) (holding that a law firm's negligence was not the proximate cause of any injury suffered by the client for purposes of the client's legal malpractice claim against the law firm where the successor counsel had sufficient time to adequately protect the client's rights).
Although Plaintiffs' claims based on the Kaprun Commission are dismissed for lack of an attorney-client relationship, it is also worth noting that Plaintiffs fail to adequately plead proximate cause with respect to the Kaprun Commission. For Plaintiffs to have plausibly pleaded proximate cause, they needed to demonstrate that, but for defendants' alleged malpractice, Plaintiffs would have received a more beneficial settlement. Notably absent from Plaintiffs' allegations is how a higher settlement could have been achieved, what that higher settlement would have been, or how defendants' malpractice resulted in Plaintiffs' accepting the lower settlement amount. Thus, Plaintiffs have also failed to plead proximate cause with respect to the Kaprun Commission.
See Rogers v. Ettinger, 558 N.Y.S.2d 540, 541 (1st Dep't 1990) (affirming lower court's grant of summary judgment where plaintiff could not demonstrate that "the settlement entered into was improvident or that [plaintiff] would have been entitled to a more beneficial settlement, but for defendants' misconduct").
Similarly, that a client raises claims of legal malpractice in connection with a settlement only after the client is billed for the attorney's services is a ground for skepticism. See Rodriguez v. Fredericks, 623 N.Y.S.2d 241, 242 (1st Dep't 1995) (holding that an attorney could not be held liable in a legal malpractice action arising from defending plaintiffs in an underlying federal action where the defense was largely successful, in that the action was settled after trial and before appeal, and the plaintiffs did not complain about the attorney's legal services until payment of overdue attorneys' fees were sought).
B. Fraud
Plaintiffs fail to plead their claim of fraud with any specificity, much less sufficient specificity to meet the stringent requirements of Rule 9(b). Plaintiffs' claims are based on assertions of a conspiracy by the Austrian government during the Kaprun Commission to assist American citizens to obtain greater settlements than foreign plaintiffs. Plaintiffs also allege that defendants failed to discover and/or disclose this fraud. Plaintiffs do not identify the representations, who made them, when they were made or who relied on them — much less, exactly why they were false at the time they were made. Indeed, Plaintiffs allege facts with no greater specificity than conclusory statements such as "defendants' representations that the Kaprun Commission, the settlement negotiations, purported settlement documents and releases and calculations of damages would be fair, equitable, and non-discriminatory against any Kaprun victim family with similar claims regardless of nationality were false." The absence of any specific allegation of fraudulent conduct in the Complaint is fatal to Plaintiffs' claims and defendants' motion to dismiss this claim is granted.
Compl. ¶ 182.
See Flutie Bros., 2006 WL 1379594, at *9 (granting defendants' motion to dismiss plaintiff's fraud claims in a malpractice action for failure to plead with particularity where plaintiff failed to include any specific allegations that the defendants' conduct toward plaintiff was in any way fraudulent or that he intended to default plaintiff by his negligent conduct).
C. Duplicative Claims
Each of Plaintiffs' remaining causes of action for negligence, breach of fiduciary duty, breach of contract, and conflict of interest arise from the same set of facts as the claim for attorney malpractice and request identical relief. As a result, they are duplicative and are dismissed. Even if these claims were not duplicative, the Complaint does not support separately maintaining these causes of action. For the reasons already discussed, Plaintiffs cannot plead the requisite proximate cause necessary for claims of negligence, conflict of interest, or breach of fiduciary duty. Moreover, for Plaintiffs to have sufficiently pleaded a non-duplicative breach of contract claim, they would have needed to identify a specific task that defendants agreed to undertake, but did not. Plaintiffs have not done so. As a result, each of these claims are also dismissed.
See Nordwind, 584 F.3d at 432-33 (affirming district court's dismissal of fiduciary duty claim as duplicative of plaintiffs' legal malpractice claim because it was premised on the same facts and seeking the identical relief as a claim for legal malpractice); Flutie Bros., 2006 WL 1379594, at *7 (dismissing plaintiff's breach of contract claim as duplicative of legal malpractice claim which was also dismissed for failure to sufficiently plead proximate cause).
See Nordwind, 584 F.3d at 432-33 ("[W]here damages are sought for breach of fiduciary duty under New York law, the plaintiff must demonstrate that the defendant's conduct proximately caused injury in order to establish liability.") (citing LNC Invs., Inc., 173 F.3d at 465); Stonewell Corp., 678 F. Supp. 2d at 211 ("A conflict of interest, even if a violation of the Code of Professional Responsibility, does not by itself support a legal malpractice cause of action. Even if a potential conflict of interest existed, [a plaintiff] must still establish that such a conflict caused an actual injury.").
See Sage Realty Corp. v. Proskauer Rose L.L.P., 251 A.D.2d 35, 38-39, 675 N.Y.S.2d 14 (1st Dep't 1998).
D. Leave to Amend
It is clear from the Complaint that the Kaprun Survivor Plaintiffs and the Kaprun Survivor Family Plaintiffs never entered into an attorney-client relationship with defendants and the Kaprun Victim Family Plaintiffs did not have an attorney client relationship with defendants for purposes of the Kaprun Commission. The Kaprun Victim Family Plaintiffs' remaining claims for malpractice in connection with the In re Ski Train Litigation are time-barred. Even if they were not time-barred, there appears to be no set of facts under which Plaintiffs can show that defendants' alleged malpractice was the "but for" cause of their injury. Accordingly, any amendment of Plaintiffs' legal malpractice claims would be futile.
Because Plaintiffs' negligence, breach of contract, conflict of interest, and breach of fiduciary duty claims are duplicative of the malpractice claim, leave to amend these claims is also denied. Plaintiffs cannot separately maintain either a breach of contract or fraud claim. Plaintiffs have neither alleged that defendants breached an explicit promise made to them nor that defendants' conduct — even if it was negligent — amounted to fraud. As a result, granting leave to replead any of these claims would be futile.
See Flutie Bros., 2006 WL 1379594, at * 10 (denying plaintiff the opportunity to amend its complaint for claims for malpractice, breach of fiduciary duty, breach of contract, and fraud where doing so would be futile).
Plaintiffs added additional facts not found in the Complaint in their Opposition. The additional facts provide only immaterial information about the Kaprun Commission, including that the settlement was mandatory, that evidence was concealed from Plaintiffs, and that Plaintiffs — through their counsel Dr. Gerhard Podovsovnik, Professor Toi Kigawa, Lowy and Fagan — undertook to explore the possibility of corruption within the Kaprun Commission after settlement occurred. Even accepting each of these additional facts as true, none of them bolster Plaintiffs' claims. On an April 19, 2010 telephone conference, this Court authorized plaintiffs to file a motion for leave to amend by April 29, 2010. Without providing any explanation or notice to the Court, Plaintiffs never filed this motion. Leave to replead is denied.
See Pl. Opp. at 2-5.
See id.
On April 29, 2010, Plaintiffs' counsel, Joy Hochstadt, wrote a letter to the Court seeking to withdraw as counsel. Neither Ms. Hochstadt nor any Plaintiff subsequently expressed a desire to amend the Complaint. Ms. Hochstadt was relieved as Plaintiffs' counsel at a May 20, 2010 conference in this action.
V. CONCLUSION
For the foregoing reasons, defendants' motion is granted and Plaintiffs' claims are dismissed with prejudice. The Clerk of the Court is directed to close this motion (Docket No. 29) and this case.
SO ORDERED: