Opinion
INDEX NO. 158606/2014
04-05-2019
HUDSON YARDS LLC, BARUCH SINGER, Plaintiff, v. DAVID SEGAL, DOUGLAS SEGAL, SUKENIK, SEGAL & GRAFF, P.C. Defendant.
NYSCEF DOC. NO. 212 PRESENT: HON. ANDREA MASLEY Justice MOTION DATE 04/30/2018, 04/30/2018 MOTION SEQ. NO. 008 009
DECISION AND ORDER
Masley, J.: The following e-filed documents, listed by NYSCEF document number (Motion 008) 147, 148, 149, 150, 151, 152, 153, 154, 155, 156, 157, 158, 159, 160, 161, 162, 163, 164, 165, 166, 167, 168, 169, 170, 171, 172, 173, 174, 175, 176, 177, 178, 179, 180, 191, 193, 195, 196, 197, 198, 199, 200, 201, 202, 203, 204, 205, 206, 207, 208, 210 were read on this motion to/for DISMISSAL. The following e-filed documents, listed by NYSCEF document number (Motion 009) 181, 182, 183, 184, 185, 186, 187, 188, 189, 190, 192, 194, 209, 211 were read on this motion to/for SUMMARY JUDGMENT.
In motion sequence number 008, defendants David C. Segal (DCS) and Sukenik, Segal & Graff, P.C. (SSG) move pursuant to CPLR 3212 for summary judgment against plaintiff Baruch Singer, dismissing the complaint. (NYSCEF Doc. No. 147 at 1.) In motion sequence number 009, defendant Douglas Segal (DS) also moves pursuant to CPLR 3212 for summary judgment against Singer seeking dismissal of the complaint. (NYSCEF Doc. No. 181 at 1.) These motions are consolidated for disposition.
Background
Hudson Yards LLC, an entity in which Singer served as managing member, purchased real estate in December 2005 and March 2006 (the premises). (NYSCEF Doc. No. 149 at ¶ 15.) Hudson Yards LLC received a mortgage in the amount of $34,266,234 from Fortress Credit Corp (Fortress). (Id.) Singer guaranteed payment of the mortgage. (Id.; NYSCEF Doc. No. 153.) Hudson Yards LLC defaulted on the payments and Fortress commenced a mortgage foreclosure action against Hudson Yards LLC and Singer, in his capacity as guarantor. (NYSCEF Doc. No. 149 at ¶ 16; NYSCEF Doc. No. 151.) On June 1, 2011, Fortress obtained a judgment of foreclosure and sale. (Id.) On September 7, 2011, Fortress purchased the premises at the sale with a winning bid of $2,500,000. (NYSCEF Doc. No. 162 at 6.) On December 4, 2013, this court (Kornreich, J) determined that the fair market value of the premises was $26,000,000, and subtracted that amount from the foreclosure judgment of $47,779,544.36 pursuant to the Real Property Actions and Proceedings Law. (Id. at ¶ 32; NYSCEF Doc. No. 169 at 6.) The resulting deficiency judgment in the amount of $21,779,544.36 was issued against Singer, who subsequently commenced this action. (Id.; NYSCEF Doc. No. 169 at 6.) Here, Singer alleges that the defendants, his prior legal counsel in connection with the foreclosure action, committed malpractice resulting in the deficiency judgment now recast as damages inclusive of accruing interest. (NYSCEF Doc. No. 149 at ¶ 37, 38.) Defendant DCS is an attorney and member of defendant SSG. (NYSCEF Doc. No. 163 at ¶ 1.) Defendant DS is an attorney, the son of DCS, and an associate with SSG. (NYSCEF Doc. No. 210 at 15.) The gravamen of Singer's malpractice claim is that defendants failed to exercise the ordinary, reasonable skill and knowledge commonly possessed by a member of the legal profession by failing to (1) memorialize an alleged agreement entered into by Singer and a Fortress employee, John Jergen, before the sale of the premises that would have prevented the deficiency judgment, (2) advise that this agreement, without memorialization, was unenforceable, (3) advise Singer to persuade the other members of Hudson Yards LLC to seek bankruptcy protection for the LLC, (4) advise Singer to bid or persuade other individuals to bid during the sale of the premises, and (5) advise Singer to seek an adjournment of the sale. (NYSCEF Doc. No. 149 at ¶ 36; NYSCEF Doc. No. 206 at 1, 2, 8, 9.)
Discussion
To obtain summary judgment, the movant must establish its cause of action or defense sufficiently to warrant the court as a matter of law in directing judgment in its favor. (CPLR 3212 [b].) This standard requires the movant to make a prima facie showing of entitlement to judgment as a matter of law, by advancing sufficient "evidentiary proof in admissible form" to demonstrate the absence of any material issues of fact. (Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985].) The court views this evidence in the light most favorable to the non-moving party opposing summary judgment and draws all reasonable inferences in that party's favor. (see Flomenbaum v New York Univ., 71 AD3d 80, 91 [1st Dept 2009].) Should the movant make a prima facie showing of entitlement to summary judgment, the burden shifts to the non-moving party to demonstrate by admissible evidence the existence of a factual issue requiring a trial of the action. (see Vermette v Kenworth Truck Co., 68 NY2d 714, 717 [1986].)
To establish legal malpractice, the plaintiff must show 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 the client to sustain actual and ascertainable damages. (Brookwood Companies, Inc., v Alston & Bird LLP, 146 AD3d 662, 666 [1st Dept 2017].) "An attorney's conduct or inaction is the proximate cause of a plaintiff's damages if 'but for' the attorney's negligence, 'the plaintiff would have succeeded on the merits of the underlying action', or would not have sustained 'actual and ascertainable' damages." (Nomura Asset Capital Corp. v Cadwalader, Wickersham & Taft LLP, 26 NY3d 40, 50 [2015].) "The failure to establish proximate cause mandates the dismissal of a legal malpractice action, regardless of the attorney's negligence." (Brooks v Lewin, 21 AD3d 731, 734 [1st Dept 2005].)
In moving for summary judgment, DCS, SSG and DC argue inter alia that Singer's allegations are speculative, and therefore, Singer fails to establish causation, warranting dismissal. DCS, SSG and DS have made a prima facie showing of entitlement to judgment as a matter of law with respect to Singer's legal malpractice claim. DCS and SSG submit inter alia the deposition of DCS who states that Singer "said he spoke to Jegen and Jegen promised him that they would make a deal after the auction." (NYSCEF Doc. No. 173 at 137.) DCS states,
"I told Singer at that time that this wasn't binding and that the fact that the man says that he will make a deal with him in the future is not enforceable because it's an agreement to agree ... And also, you have an agreement which says any modification has to be in writing. I said, 'Jegen can screw you.' And [Singer] said - and I remember this clearly - 'Jegen won't screw me. He's my friend.'(Id. at 138.) When asked if DCS counseled Singer to implement other contingencies in the event that Fortress did not act in accordance with Singer's expectations (Id. at 141 ["Did you say, therefore, you ought to do X or Y or Z?"]), DCS stated, "No ... I felt there was nothing more that he could do. There was an auction that was going on, and our goal was to fight the deficiency judgment on the basis of the valuation of the property ... That was our plan throughout." (Id.) When asked, in essence, why DCS did not seek an adjournment of the foreclosure sale, DCS responded,
"I believed from my conversations with [Fortress' counsel] that they would never agree to an adjournment because we had delayed the foreclosure sale for years, and we believed the court was very disturbed with us for delaying it so long and I knew [Fortress' counsel] was disturbed with us and would never agree to an adjournment. The court would not have granted it because we had no reason to seek an adjournment. In other words, we had no legal basis of seeking an adjournment."(Id. at 145.) When asked why DCS did not advise Singer to persuade the other members of Hudson Yards LLC to seek bankruptcy protection for the LLC, DCS responded, "I thought it would be a frivolous act ... Because it wouldn't have been accomplishing anything and it would have increased the amount of his obligation to Fortress by increasing the amount of interest that he would owe to Fortress. The delay of the auction would have hurt him." (Id. at 151.)
DCS also testified that he did not advise Singer to bid at the sale because Singer represented to DCS that Singer was insolvent. (Id. at 153 [He had no money. He told me he had no money ... Zero ... Nothing. Zippo. Unless he was lying to me on ... his financials"].) DCS noted that Singer never indicated that Singer had colleagues who were prepared to bid in excess of $50 million at the sale of the premises. (Id. at 153-154.)
With respect to the matter of DCS and SSG's alleged negligence insofar as they failed to memorialize the alleged agreement reached between Singer and Jergen, DCS and SSG submit Fortress' responses to depositions upon written questions. (NYSCEF Doc. No. 178.) In these responses, Fortress stated that it "had no intention of adjourning" the foreclosure sale scheduled for September 7, 2011. (Id. at 5.) Fortress also testified that it "did not agree to any settlement with ... Singer at any point prior to the September 7, 2011 Foreclosure Sale, including a release of ... Singer from his obligations pursuant to the Personal Guaranty." (Id. at 6.) Fortress further noted that, "Mr. Jergen did not have the authority to bind Fortress Credit to a settlement of the Underlying Action ... or a release of Baruch Singer's obligations pursuant to the Personal Guaranty ... at any time during the period between July 1, 2011 and September 7, 2011." (Id. at 7.)
DS submits the deposition testimony of Singer who states that prior to the day of the auction, September 7, 2011, Singer did not consult with DS. (NYSCEF Doc. No. 184 at 192.) Singer further states that he never met with DS alone prior to September 7, 2011 with respect to matters concerning Fortress. (Id. at 195.) Singer also states in his deposition that he never asked DS to prepare correspondence or letters to Fortress. (Id.) In addition, Singer testified that he did not specifically ask DS to prepare paperwork on behalf of Hudson Yards LLC prior to the foreclosure sale as it relates to the agreement that Singer allegedly reached with Jergen. (NYSCEF Doc. No. 185 at 334.) To the extent that Singer testified that DS informed Singer at the sale, "You can be quiet," (Id. at 199) and therefore, Singer did not bid, DS incorporates by reference the arguments made by DCS and SSG. (NYSCEF Doc. No. 190 at 12.)
The admissible evidence submitted indicates that DCS and SSG advised Singer, and acted in a deliberate manner in accordance with a litigation strategy to counter any deficiency judgment on the basis of the premises' valuation while minimizing Singer's costs in light of Singer's representation of his insolvency. Indeed, "[a]n attorney's selection of one among several reasonable courses of action does not constitute malpractice." (Brookwood Companies, Inc., 146 AD3d at 667.) "An attorney is not held to the rule of infallibility and is not liable ... where the proper course is open to reasonable doubt." (Id.) Moreover, the evidence shows that Jergen had no authority to bind Fortress, undercutting any damage allegedly caused by DCS and SSG's failure to memorialize whatever agreement Singer believed he had reached with Fortress through Jergen. DCS, SSG, and DC ultimately demonstrate that they did not fail to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession, and even if they did, they did not cause the alleged damages sustained by Singer. Accordingly, the burden shifts to Singer.
In his affidavit, Singer asserts that prior to the sale of the premises, he reached a settlement with Fortress' Asset Manager, John Jegen, who represented that he had authority to act on Fortress' behalf. (NYSCEF Doc. No. 195 at ¶ 3.) The alleged terms of the agreement were that Fortress would release Singer from liability under the guarantee in exchange for Singer's promise to (1) pay $1,500,000 to Fortress, (2) not interfere with or delay the sale, (3) not bid or bring other potential bidders to the auction, and (4) use Singer's best efforts to insure that the other members of Hudson Yards LLC did not file for bankruptcy. (Id. at ¶ 12.) Singer provides that he instructed DCS to memorialize the agreement, but DCS failed to do so. (Id. at ¶ 2.) Singer claims that DCS never advised Singer that there was no enforceable agreement. (Id. at ¶ 15.) Indeed, Singer states, "I am not an attorney and did not know for certain whether my oral agreement was legally enforceable." (Id. at ¶ 17.) To the extent that there is any conflicting evidence on this point, Singer argues that an issue of fact exists. (NYSCEF Doc. No. 206 at 1.)
Additionally, Singer maintains that even if no agreement was reached, the defendants were still required to provide him with legal advice and advise him of the risks of not interfering with the auction and recommend other strategies including bidding or filing for bankruptcy. (Id. at ¶ 4.) Specifically, Singer contends, that if the Defendants advised him that the agreement was not enforceable, Singer "would have advised" three individuals - Manouchehr Malekan, Joel Schreiber and Leslie Westreich - to bid at the auction and purchase the premises either for themselves or in a joint venture with Singer. (Id. at ¶ 5, 18, 24, 25.) In support, Singer submits testimony from these individuals. (NYSCEF Doc. No. 197, 198, 199.) Lastly, Singer notes that Jegen informed Singer "after the auction that he had been 'overruled' by Fortress' management.'" (NYSCEF Doc. No. 24 at 15.)
Based on this record, even if DCS, SSG or DS negligently represented Singer in connection with the foreclosure action and deficiency judgment, Singer fails to establish any issues of fact as to proximate cause, mandating a dismissal. (Brooks v Lewin, 21 AD3d 731, 734 [1st Dept 2005].) "Contentions underlying a claim for legal malpractice which are 'couched in terms of gross speculations on future events and point to the speculative nature of plaintiffs' claim," are insufficient as a matter of law to establish that defendants' negligence, if any, was the proximate cause of plaintiffs' injuries." (Phillips-Smith Specialty Retail Group II, L.P., v Parker Chapin Flattau & Klimpl, LLP, 265 AD2d 208, 210 [1st Dept 1999].) Here, Singer's argument is if defendants advised him that the agreement was unenforceable or memorialized the agreement, he would not have to pay the deficiency judgment because he would have (1) persuaded the other members of Hudson Yards LLC to seek bankruptcy protection, (2) sought and received an adjournment of the sale, and (3) advised Malekan, Schreiber and Westreich to purchase the premises. This argument is, quintessentially, couched in terms of gross speculation on future events because it assumes that the other members of Hudson Yards LLC would have agreed to seek bankruptcy protection or that bankruptcy protection would have relieved Singer of his obligations to pay the balance of a debt he personally guaranteed. It assumes that adjournment of the sale would have been granted and within that time, Fortress would have entered into an enforceable agreement with Singer to forego the deficiency judgment. Lastly, it assumes that Malekan, Schreiber, Westreich, and Singer would have bid on the premises. (see generally Ladera Partners, LLC v. Goldberg, Scudieri & Lindenberg, P.C., 157 A.D.3d 467, 468 [1st Dept 2018] ["The legal malpractice cause of action is not properly supported by conclusory allegations and speculation that, but for defendants' negligence, plaintiff would have been able to ... outbid the other participants at the auction].) Simply stated, "the hypothetical course of events on which determination of damages would have to be based, involving the nature and timing of acts by plaintiff[] ... other parties having interests ... and the bankruptcy court, constitutes a chain of 'gross speculation on future events.'" (Phillips-Smith Specialty Retail Group II, L.P., v Parker Chapin Flattau & Klimpl, LLP, 265 AD2d at 210.) Accordingly, it is hereby
ORDERED that defendants David C. Segal, Sukenik, Segal & Graff, P.C., and Douglas Segal's motions for summary judgment to dismiss the complaint are granted with costs and disbursements as taxed by the Clerk of the Court upon submission of an appropriate bill of costs, and it is further
ORDERED that the Clerk is directed to enter judgment accordingly.
This constitutes the decision and order of the court. Dated: 4/5/19
ENTER:
/s/_________