Opinion
99 Civ. 11783 (JCF).
March 6, 2002
MEMORANDUM AND ORDER
This is a diversity action alleging legal malpractice arising out of the divorce of Carl Icahn, the billionaire, and Liba Icahn, the plaintiff in this case. Ms. Icahn has sued the firm of Todtman, Nachamie, Spizz Johns (the "Todtman Firm"), which initially represented her in proceedings to dissolve her marriage.
The parties have consented to referral of the action to me for final disposition pursuant to 28 U.S.C. § 636(c).
The Todtman Firm has now moved in limine to preclude evidence of the amount that Ms. Icahn paid in satisfaction of a charging lien asserted by the firm for services rendered. According to the defendant, introduction of that evidence would violate a stipulation of inadmissibility that was part of the settlement that resolved the fee dispute. Ms. Icahn opposes the motion and seeks to prove the amount paid to the Todtman Firm as an element of her damages.
For the following reasons, the defendant's motion is granted.
Unless otherwise noted, the facts set forth here have been gleaned from more detailed information contained in the summary judgment decision of the Honorable William H. Pauley III, U.S.D.J., to whom the case was previously assigned. That decision can be found at 2001 WL 1160582 (S.D.N.Y. Oct. 1, 2001).
Liba Icahn began dating Carl Icahn in the summer of 1978 when he was forty-one years old and already a millionaire. Eight months later she learned that she was pregnant. Carl Icahn agreed to marry her if she would execute a prenuptial agreement, and after initially objecting to the document that he presented her with, Ms. Icahn signed it on the day of the wedding.
In 1993, Ms. Icahn retained Carl Tunick of the Todtman Firm to represent her in divorce proceedings against her husband. In the divorce action filed in New York State Supreme Court, Westchester County, Ms. Icahn asserted that the prenuptial agreement was unenforceable because it had been obtained through duress and coercion and provided for an unconscionable division of the marital assets. Carl Icahn moved for partial summary judgment on Ms. Icahn's claims of duress and coercion, arguing in part that they were barred by New York's six-year statute of limitations. The court agreed, rejecting Ms. Icahn's contention that the limitations period should be tolled during the term of the marriage. After the Appellate Division affirmed this decision, Ms. Icahn obtained new counsel. The proceedings were concluded in 1999, when, through settlement, Ms. Icahn obtained a divorce on grounds of abandonment and received $20 million and other assets from the marital estate.
After settlement was reached in the divorce action, the Todtman Firm filed a petition to enforce a charging lien in the state Supreme Court, seeking $500,772.88 as the amount allegedly due for work performed by Mr. Tunick. (Affidavit of Philip S. Kaufman dated Jan. 18, 2002 ("Kaufman Aff."), Exh. 2 ¶ 5).
Subsequently, Liba Icahn commenced the instant lawsuit in this Court, claiming that the Todtman Firm committed malpractice when Mr. Tunick failed to advise her to move to Connecticut and initiate divorce proceedings there, where her attack on the prenuptial agreement would not have been doomed by New York's statute of limitations. Ms. Icahn contends that with proper legal advice she could have obtained approximately $1.4 billion, which allegedly represents a one-third distribution of the marital estate.
On July 17, 2000, counsel for Ms. Icahn placed on the record in state court an agreement resolving the fee dispute. He stated:
The settlement is as follows: Liba Icahn agrees to pay the petitioner law firm the sum of $375,000 within ten days. The condition of the payment is that everything that has happened in this proceeding, through and including the settlement thereof, will not be admissible in any shape or form in the federal action between the parties entitled Liba Icahn against Todtman, Nachamie now pending in the [S]outhern [D]istrict of New York.
(Kaufman Aff., Exh. 1 at 76). Counsel for the Todtman Firm initially objected to this provision, contending:
we have not stipulated everything that has happened thus far in this entire action not be admissible in the Federal Court. What we stipulated, as I understand it, is this settlement is without prejudice to everybody's right in the Federal Court.
(Kaufman Aff., Exh. 1 at 76-77). After further discussion, counsel for Ms. Icahn reiterated the inadmissibility provision:
The stipulation that I've asked for is that nothing relating to the petition by Todtman, Nachamie to enforce its charging lien or any of the proceedings that have taken place pursuant to that petition, including today's testimony and settlement, will be admissible in anyway [sic] in the federal action between the parties.
(Kaufman Aff., Exh. 1 at 81). The Todtman Firm then agreed to this condition. (Kaufman Aff., Exh. 1 at 81-83).
At the conclusion of discovery in the instant case, the Todtman Firm moved for summary judgment on a number of grounds.
Judge Pauley denied the motion, but Ms. Icahn's victory was a Pyhrric one because the Court held that "damages based on an award she would have won from her ex-husband if not for the Todtman Firm's alleged malpractice are too speculative to maintain a claim." 2001 WL 1160582, at *8. Thus, she was relegated to a claim for recovery only of the legal fees she had paid to the Todtman Firm.
At that point the case was assigned to me and the defendant filed the pending motion. The Todtman Firm argues that the broad language of the inadmissibility provision of the fee settlement precludes admission of any aspect of that settlement, including the payment made by Ms. Icahn. (Defendant's Memorandum of Law in Support of Motion In Limine to Exclude Evidence of Plaintiff's Payment of Fees Pursuant to Settlement ("Def. Memo.") at 5-6). In contrast, Ms. Icahn contends, first, that while the inadmissibility stipulation may bar reference to the settlement, it does not preclude evidence of payments made pursuant to that settlement. (Plaintiff's Memorandum in Opposition to Defendant's Motion In Limine to Exclude Evidence of Payment of Fees by Plaintiff to Defendant ("Pl. Memo.") at 4). Second, she maintains that 4 settlement of the fee dispute in New York State Supreme Court in fact preserved all of her claims for relief in the event of a finding in her favor in this case:
A number was reached through negotiation which would represent the amount of additional legal fees that plaintiff would pay defendant if there were no finding of malpractice in her favor. That negotiated figure was $375,000, out of more the than $500,000 sought by defendant. The issue of whether there had been malpractice was then deferred for adjudication in this action.
(Pl. Memo. at 6). Finally, the plaintiff maintains that if nothing about the state court settlement may ever be revealed, then the Todtman Firm has violated that restriction by bringing the instant motion.
Discussion
A. Enforceability
This last argument presents a threshold issue: If the inadmissibility provision precludes the defendant's motion, then I need proceed no further. The plaintiff's contention, however, is illogical. A contractual provision ought not be construed as defeating enforcement of the very agreement that contains it.
Otherwise, every stipulation of settlement that included a confidentiality provision would be unenforceable, since confidentiality would be "violated" by any party seeking enforcement. "A contract must be construed, if possible, to avoid an interpretation that will result in an absurdity, an injustice or have an inequitable or unusual result." Natwest USA Credit Corp. v. Alco Standard Corp., 858 F. Supp. 401, 413 (S.D.N.Y. 1994) (citation omitted); see also Goldman v. Burch, 778 F. Supp. 781, 788 (S.D.N.Y. 1991) ("construction of contract provisions resulting in the parties' agreement to nullities or absurdities is to be avoided"). Accordingly, the inadmissibility provision of the agreement here does not bar the defendant from moving to enforce it.
B. Rules of Construction
A stipulation is interpreted in light of the rules of construction in the jurisdiction in which it was entered into. See Israel v. Carpenter, 120 F.3d 361, 366 (2d Cir. 1997) (construing stipulation of dismissal in Massachusetts state court in light of Massachusetts law). Therefore, since the settlement of the fee issue here took place in New York State Supreme Court, New York law governs.
In New York, "`[s]tipulations of settlement are essentially contracts and will be construed in accordance with contract principles and the parties' intent.'" Sharp v. Stavisky, 221 A.D.2d 216, 217, 633 N.Y.S.2d 488, 489 (1st Dep't 1995) (quoting Serna v. Pergament Distributors, Inc., 182 A.D.2d 985, 986, 582 N.Y.S.2d 550, 552 (3d Dep't 1992); see also Corrigan v. Breen, 241 A.D.2d 861, 863, 660 N.Y.S.2d 503, 504 (3d Dep't 1997); Drew v. Prudential Insurance Co., 224 A.D.2d 1036, 1037, 637 N.Y.S.2d 589, 590 (4th Dep't 1996); Rebell v. Trask, 220 A.D.2d 594, 596, 632 N.Y.S.2d 624, 626 (2d Dep't 1995). Where a contract is clear, the intent of the parties is to be inferred from the language of the agreement. See Corrigan, 241 A.D.2d at 863, 660 N.Y.S.2d at 504; Drew, 224 A.D.2d at 1036, 637 N.Y.S.2d at 590; Rebell, 220 A.D.2d at 596-97, 632 N.Y.S.2d at 626-27.
C. Application of Contract Principles
Here, the language utilized by the parties, and indeed insisted upon by plaintiff's counsel, was straightforward:
"nothing relating to the petition by Todtman, Nachamie to enforce its charging lien or any of the proceedings that have taken place pursuant to that petition, including today's testimony and settlement, will be admissible in anyway [sic] in the federal action." (Kaufman Aff., Exh. 1 at 81). To the extent that this stipulation prevents a party from offering otherwise admissible evidence, it is nevertheless binding and enforceable under both state and federal law. See Blum v. Morgan Guaranty Trust Co., 709 F.2d 1463, 1465 (11th Cir. 1983) (Georgia law); United States v. Gale, 508 F. Supp. 1038, 1044 (S.D.N.Y. 1981); Stamos v. Commissioner, 87 T.C. 1451, 1455 (1986); Xerox Corp. v. Town of Webster, 206 A.D.2d 935, 935, 616 N.Y.S.2d 119, 120 (4th Dep't 1994) (New York law).
The plain language of the stipulation is entirely consistent with the rational interests of the parties at the time the settlement of the fee issue was consummated. By insisting on the inadmissibility provision, Ms. Icahn's counsel insured that there would be no inference in the federal malpractice case that by paying the fees, even in part, she had admitted that the Todtman Firm's representation was adequate. This served to enhance Ms. Icahn's prospects of prevailing on her claim for tens of millions of dollars as her share of the marital estate.
By contrast, the plaintiff's alternative interpretations of the inadmissibility stipulation lack plausibility. First, she 7 contends that while the stipulation might prevent her from offering evidence of the settlement, it does not preclude her from introducing proof of monies paid to the Todtman Firm pursuant to that settlement. But to the extent that Ms. Icahn's interest was not to appear to endorse the quality of the Todtman Firm's representation, this would be the worst outcome. Not only would there be evidence that she had paid the firm a substantial sum, but she would not be able to argue that this was done under the pressure of settling a larger claim.
Similarly, the suggestion that the settlement of the lien was "temporary" has no support in the language of the stipulation. If the parties had intended that the payment by Ms. Icahn of $375,000 be contingent on the Todtman Firm prevailing in the malpractice action, this contingency would surely have been made explicit. It was not. Moreover, the plaintiff's construction is belied by the parties' actions. Ms. Icahn did not merely promise to pay the settlement amount depending on future events; she actually paid it.
(Pl. Memo. at 5 n. 1).
In context, then, the intent of the parties was plain. They wanted to settle the fee question and focus on the potentially much more significant malpractice issue. However, the plaintiff in particular wanted to do so in a way that did not risk diminishing her chances of success in the malpractice action. Hence, her attorney required the inadmissibility stipulation. What he did not foresee was that Judge Pauley would preclude as too speculative any damages other than those relating to the fees for which Ms. Icahn was out-of-pocket. Obviously, in hindsight, the plaintiff would 8 prefer not to have agreed to be barred from introducing evidence on what now is her only remaining claim for damages. But that was part of the bargain she struck, and it remains binding.
Conclusion
For the reasons set forth above, the defendants' motion in limine is granted, and the plaintiff is precluded from introducing evidence concerning settlement of the fee issue.
SO ORDERED.