Opinion
INDEX NO. 150729/2017
07-03-2019
CHRISTOPHER JONNS, Plaintiff, v. GABRIEL FISCHBARG, Defendant.
NYSCEF DOC. NO. 77 PRESENT: HON. KATHRYN E. FREED Justice MOTION SEQ. NO. 002
DECISION AND ORDER
The following e-filed documents, listed by NYSCEF document number (Motion 002) 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 67, 68, 69, 70 were read on this motion for REARGUMENT. Upon the foregoing documents, it is ordered that the motion and cross motion are decided as follows.
In this legal malpractice action, defendant Gabriel Fischbarg ("Fischbarg") moves, pursuant to CPLR 2221(d), to reargue his prior motion to dismiss the complaint of plaintiff Christopher Jonns ("Jonns") in its entirety. The complaint asserted three causes of action against Fischbarg: legal malpractice, breach of contract, and breach of fiduciary duty. In the prior decision, this Court dismissed Jonns' claim for breach of contract, but declined to dismiss the other two causes of action. Fischbarg seeks reargument and, upon reargument, dismissal of the first and third causes of action. Jonns opposes the motion and cross-moves, pursuant to CPLR 602, to consolidate this action with another action. Fischbarg opposes the cross motion. After oral argument, and after reviewing the parties' papers and the relevant statutes and caselaw, it is ordered that the motion and cross motion are decided as follows.
FACTUAL AND PROCEDURAL BACKGROUND:
The factual background of this action is set forth at length in the prior decision and order of this Court. (See Doc. 46.) However, because the arguments made in the motion are so factually oriented, a brief recapitulation of the facts is in order: In August of 2010, Jonns, together with a group of investors, sought to purchase the Charles Restaurant from Dorsia 8:30 LLC ("Dorsia"). (Id. at 2.) Jonns retained Fischbarg as the attorney on behalf of the investors to facilitate the transaction. (Id.) In doing so, Jonns sought to ensure that a limited liability company ("LLC") would be formed absolving him and the investors of personal liability from their operation of the Charles Restaurant once the transaction was completed. (Id. at 2-3.) They also wanted Fischbarg to apply for sale-of-liquor licenses from the New York State Liquor Authority ("the SLA"). (Id. at 3.)
Unbeknownst to Jonns, Fischbarg also acted as the attorney for Dorsia. (Id.) Nor did Fischbarg inform him that he should purchase Dorsia through an LLC if he wanted to shield his personal liability in maintaining the Charles Restaurant. (Id.) Thus, on August 11, 2010, Jonns signed a purchase agreement for the Charles Restaurant in his personal capacity. (Id.) As a result, Jonns assumed up to $200,000 worth of Dorsia's debt that existed on the date of the signing, responsibility for Dorsia's obligations under the lease, and the obligation to indemnify and hold Dorsia harmless for any claims arising from the Charles Restaurant's operation. (Id.) Fischbarg reassured Jonns that those obligations and liabilities would subsequently be assigned to an LLC that would be owned by the investors. (Id.)
Although this should have presented an obvious conflict of interest to Fischbarg, he never obtained a conflict waiver from Jonns or the investors. (Doc. 46 at 3.)
In September of 2010, Fischbarg formed an LLC known as Crazy Asylum LLC ("Crazy Asylum") and made Jonns and the other investors its members. (Id. at 4.) The sale of the Charles Restaurant between Jonns and Dorsia closed on September 13, 2010 (id.), but Jonns' obligations and liabilities were never transferred to Crazy Asylum (see id.). The Charles Restaurant eventually closed in March of 2015. (Id.)
Despite Jonns having assumed personal liability for the Charles Restaurant, it was Dorsia that ended up expending over $180,000 in satisfying the debts of the business creditors as well as in costs for eviction proceedings instituted by the landlord. (Id.) In June of 2016, Dorsia commenced an action against Jonns ("the Dorsia action") for breach of the purchase agreement. (Id.)
On March 16, 2017, Jonns commenced the instant action against Fischbarg, alleging legal malpractice, breach of contract, and breach of fiduciary duty. (Id. at 5.) On May 31, 2017, Jonns filed a first amended complaint, adding allegations that Fischbarg continued to act as Jonns' attorney through July of 2016 and that Fischbarg has represented Jonns in the Dorsia action by preparing a memorandum of law to dismiss Dorsia's complaint. (Id.)
In motion sequence 001, Fischbarg moved, pursuant to CPLR 3211(a)(1), (7), and (8), to dismiss Jonns' complaint in its entirety. (Id. at 2.) In a decision and order rendered on September 18, 2018, this Court dismissed Jonns' second cause of action for breach of contract, but left intact the other two causes of action for legal malpractice and breach of fiduciary duty. (See Doc. 46.) With respect to the legal malpractice cause of action, this Court found that Jonns' first amended complaint adequately pleaded the elements for legal malpractice (id. at 13) and that the claim did not run afoul of the applicable three-year statute of limitations (id. at 14). Specifically, this Court reasoned:
Although Fischbarg may have improperly drafted the purchase agreement in August of 2010, his negligence did not become actionable until Jonns suffered actual damages. In this instance, Jonns allegedly suffered actual damages when he was forced to
defend himself in the Dorsia action, which was commenced in June of 2016, as a result of Fischbarg's failure to advise him not to sign the purchase agreement in his own personal capacity.(Id.) Because Jonns commenced the instant action in March of 2017, this Court found that the cause of action for professional malpractice was timely. (Id.)
In allowing Jonns to proceed with his claim for breach of fiduciary duty, this Court held that it was not duplicative of his claim for legal malpractice because it was premised on a slightly different set of facts: Whereas the crux of Jonns' claim for legal malpractice is that he became personally liable for the losses of the Charles Restaurant due to Fischbarg's failure to draft the purchase agreement as being between Dorsia and an LLC, the core of his breach of fiduciary claim is that Fischbarg had a conflict of interest in representing both the buyer and seller during the course of the business transaction for the Charles Restaurant. (Id. at 16.) Moreover, this Court held that the statute of limitations was tolled to July 25, 2016, since the complaint alleged that Fischbarg had prepared a memorandum of law on behalf of Jonns to dismiss Dorsia's complaint in the Dorsia action. (Id. at 18.)
In motion sequence 002, Fischbarg now moves, pursuant to CPLR 2221(d), to reargue his prior motion to dismiss the complaint. (Doc. 39.) With respect to Jonns' legal malpractice claim, Fischbarg argues that "the accrual of a claim for legal malpractice is the time of malpractice, not the Plaintiff's discovery of injury." (Doc. 51 at 11.) Fischbarg asserts that the three-year statute of limitations for legal malpractice began running in September of 2010 (id. at 12) because that is when his alleged negligent conduct occurred: "The mere fact that [Jonns] discovered the alleged act of malpractice when he was sued in 2016 changed nothing, as his potential personal liability existed as soon as the closing occurred [in September of 2010]." (Id. at 12-13.) Moreover, Fischbarg argues that the statute of limitations was not tolled to June of 2016 because the services he rendered to Jonns at that time did not pertain to the 2010 transaction, but rather to the 2016 action between Dorsia and Jonns. (Docs. 40 at 10-11; 51 at 18.)
This Court commends Fischbarg's counsel for making compelling arguments in this motion for reargument. The initial moving papers in motion sequence 001, which were written by Fischbarg himself, were unfortunately woefully short of articulate. (See Doc. 6.)
Fischbarg likewise argues that Jonns' claim for breach of fiduciary duty is untimely because the statute of limitations was not tolled. (Id. at 18-20.) Again, he argues that the fact that he drafted a memorandum of law in the 2016 action between Dorsia and Jonns did not evidence a continued representation of Jonns for the 2010 transaction. (Id. at 20.) Further, Fischbarg again asserts that Jonns' breach of fiduciary duty claim is duplicative of his legal malpractice claim because they arise from "the very same alleged conduct." (Doc. 51 at 20.)
Jonns opposes the motion and cross-moves, pursuant to CPLR 602, to consolidate this action with another action styled Fischbarg v Jonns, Supreme Court, New York County Index Number 654695/2018 ("the Fischbarg action"). (Doc. 55.) Regarding his cause of action for legal malpractice, Jonns argues that this Court correctly determined that it was timely because it did not become actionable until he suffered actual damages, i.e., in June of 2016 when he was forced to defend himself in the Dorsia action (Doc. 65 at 19-20), and because Fischbarg kept representing him in 2016 with respect to the 2010 transaction (id. at 22).
With respect to his claim for breach of fiduciary duty, Jonns also asserts that the continuous representation doctrine applies and that the claim is therefore timely. (Id. at 25.) Because the factual allegations underlying this claim are different than the facts underlying his cause of action for legal malpractice, Jonns asserts that the two causes of action are not duplicative. (Id. at 26-27.)
Jonns cross-moves to consolidate the instant action with the Fischbarg action on the basis that the two actions share similar issues of law and fact. (Id. at 27-28.) Specifically, Jonns alleges that both actions arise from Fischbarg's allegedly negligent handling of the 2010 transaction: Where a "client commences an action against an attorney for malpractice in one case, and the attorneys commence a second action against that client for attorney fees, the cases must be consolidated." (Id. at 28-29.)
In opposition to the cross motion to consolidate, Fischbarg maintains that the instant action should not be consolidated with the Fischbarg action because the two proceedings have diverse issues of law and fact. (Doc. 69 at 20.) In particular, he argues that, while the instant action is premised on his alleged negligent handling of the 2010 transaction over the Charles Restaurant, his action against Jonns is premised on a fee dispute over a different piece of property that he helped Jonns acquire, and that his services for that transaction lasted from 2012 through 2014. (Id. at 21.)
LEGAL CONCLUSIONS:
a. Fischbarg's Motion for Reargument.
The purpose of a motion for leave for reargument pursuant to CPLR 2221(d) is to afford a party an opportunity to demonstrate that, in issuing a prior order, the court overlooked relevant facts or that it misapplied a controlling principle of law. (See Foley v Roche, 68 AD2d 558, 567 [1st Dept 1979].) "Reargument is not designed to afford the unsuccessful party successive opportunities to reargue issues previously decided or to present arguments different from those originally asserted." (William P. Pahl Equip. Corp. v Kassis, 182 AD2d 22, 27 [1st Dept 1992] (citations omitted).) Thus, the motion is not to be used as a vehicle for rehashing what was already argued or for raising new questions. (See Simpson v Loehmann, 21 NY2d 990, 990 [1968].)
The prior decision of this Court determined that Jonns' amended complaint adequately pleaded the elements for legal malpractice: (1) that the attorney failed to exercise the degree of care, skill, and diligence commonly possessed and exercised by a member of the legal community, (2) that such negligent failure was a proximate cause of the loss in question, and (3) that the plaintiff sustained actual and ascertainable damages. (See Barbara King Family Trust v Voluto Ventures LLC, 46 AD3d 423, 424 [1st Dept 2007].) Neither party disputes that finding. Instead, what the parties dispute is this Court's finding that the cause of action was timely commenced. (See Docs. 40 at 8; 51 at 11; 65 at 17.)
Once again, this Court sets forth the following analytical framework for when a legal malpractice action must be commenced: A legal malpractice action must be commenced within the three-year statute of limitations. (See McCoy v Feinman, 99 NY2d 295, 301 [2002].) In determining when the statute of limitations begins to run, courts have held that the "accrual time is measured from the day an actionable injury occurs . . . ." (McCoy, 99 NY2d at 301.) "What is important is when the malpractice was committed, not when the client discovered it." (Id. (quotations omitted).) The limitations period, however, may be tolled where there is a continuing attorney-client relationship pertaining specifically to the matter in which the attorney committed the alleged malpractice (see Shumsky v Eisenstein, 96 NY2d 164, 168 [2001]), and where there was "a mutual understanding of need for further services in connection with that same subject matter" (Davis v Cohen & Gresser, LLP, 160 AD3d 484, 486 [1st Dept 2018]).
After examining the parties' arguments on this issue, this Court determines that leave for reargument must be denied as to Jonns' claim for legal malpractice. Much of Fischbarg's argument focuses on his assertion that "the malpractice was alleged to have occurred at the time of the September 2010 closing and prior thereto . . . ." (Doc. 51 at 13; see also Docs. 40 at 9; 69 at 9.) He cites to a number of cases where courts held that legal malpractice claims accrued no later than the date that particular transactions were closed. In both Johnson v Proskauer Rose LLP, 129 AD3d 59, 67 (1st Dept 2015), and Goldman v Akin Gump Strauss Hauer & Feld LLP, 46 AD3d 481, 481-82 (1st Dept 2007), for instance, the courts held that the statute of limitations for legal malpractice began running once the attorneys had completed the specific matters for which they were retained. (See Johnson, 129 AD3d at 67 (statute of limitations began running when the defendant-attorneys drafted and issued an opinion letter offering tax advice to plaintiff); see also Goldman, 46 AD3d at 481-82 (limitations period began running when defendant-attorneys drafted the documents necessary to consummate a deal that had already been negotiated and agreed to).) Thus, since the transaction over the Charles Restaurant closed on September 13, 2010, Fischbarg argues that that is the date when Jonns' claim for legal malpractice accrued (see Doc. 40 at 9), and that Jonns therefore had three years from that date to bring his cause of action for malpractice.
If the completed 2010 closing of the sale of the Charles Restaurant were the end of the matter, Fischbarg's stated reasons for reargument would likely prevail. However, courts have recognized that "the supposed completion of the contemplated work does not preclude application of the continuous representation toll if inadequacies or other problems with the contemplated work timely manifest themselves after that date and the parties continue the professional relationship to remedy those problems." (Architect v Kodsi, 169 AD3d 1019, 1020 [2d Dept 2019]; Regency Club at Wallkill LLC v Appel Design Group, P.A., 112 AD3d 603, 607 [2d Dept 2013].)
Here, Jonns alleges in his complaint that there were inadequacies with how the transaction was handled. Specifically, Jonns alleged that there were inadequacies relating to both his personal liabilities as well as those of the other investors (Doc. 41 at 6-9), and he further alleged that Fischbarg assured him, subsequent to the closing, that he would take necessary steps to transfer Jonns' liabilities to Crazy Asylum (id. at 6-7.) Thus, this is a situation where the client was "acutely aware of [the] need for further representation on the specific subject matter underlying the malpractice claim." (Johnson, 129 AD3d at 69.) Further, Fischbarg's continued representation to transfer Jonns' personal liabilities to an LLC was not merely a general continuing relationship between lawyer and client, but rather pertained "specifically to the matter in which [he] committed the alleged malpractice," (Shumsky v Eisenstein, 96 NY2d 164, 168 [2001]), i.e., the handling of the 2010 transaction. Since the complaint alleged that Fischbarg continued in his efforts to transfer Jonns' liabilities to Crazy Asylum until at least July of 2016 (Doc. 41 at 7), and since the instant action was commenced in March of 2017 (Doc. 46 at 5), this Court therefore adheres to its original determination that Jonns' claim for legal malpractice is timely.
Thus, Fischbarg's argument that the "only purported 'legal services' provided by [him] concerning the Transaction following the closing was the alleged drafting of a memorandum of law in the Dorsia Action in 2016" (Doc. 51 at 18) is contradicted by allegations in the complaint that he sought to transfer Jonns' liabilities subsequent to the 2010 closing (see Doc. 41 at 6-8).
Since the underlying motion that Fischbarg seeks to reargue was "a motion to dismiss the complaint, the allegations must be assumed to be true." (Johnson v Proskauer Rose LLP, 129 AD3d 59, 62 [1st Dept 2015].) Fischbarg can always prove otherwise through the process of discovery or at trial. Indeed, this Court has independently verified that the parties are still conducting discovery in this action.
The second issue presented to this Court by Fischbarg's reargument motion is whether the prior decision correctly allowed Jonns to proceed with his cause of action for breach of fiduciary duty. (See Doc. 39 at 1.) His arguments for dismissing the claim for breach of fiduciary duty are identical to the ones he advanced to dismiss the claim for legal malpractice. (Doc. 51 at 18 ("For the same reasons . . . [Jonns'] claim for breach of fiduciary duty is time barred and the continuous representation doctrine does not apply.").)
Again, as set forth in the prior decision, "New York law does not provide a single statute of limitations for breach of fiduciary duty claims. Rather, the choice of the applicable limitations period depends on the substantive remedy that the plaintiff seeks." (IDT Corp. v Morgan Stanley Dean Witter & Co., 12 NY3d 132, 139 [2009].) As with legal malpractice claims, on a claim for breach of fiduciary duty, "[t]he continuous representation doctrine tolls the running of the statute of limitations on a cause of action against a professional defendant only so long as the defendant continues to represent the plaintiff in connection with the particular transaction which is the subject of the action and not merely during the continuation of a general professional relationship." (Tramp. Workers Union of Am. Local 100 AFL-CIO v Schwartz, 32 AD3d 710, 713 [1st Dept 2006] (internal quotations omitted).) Therefore, this Court again concludes that Jonns' claim for breach of fiduciary duty is timely because the complaint alleged that Fischbarg continued in his efforts to transfer Jonns' liabilities to Crazy Asylum until at least July of 2016 (see Doc. 41 at 7), and because those efforts clearly pertained to the handling of the 2010 transaction.
Last, this Court finds that the claims for breach of fiduciary duty and legal malpractice are not duplicative. A claim for breach of fiduciary duty is duplicative when it is "predicated on the same allegations and seek[s] relief identical to that sought in the malpractice cause of action." (Estate of Nevelson v Carro, Spanbock, Kaster & Cuiffo, 230 AD2d 399, 400 [1st Dept 2002].)
As concluded in the prior order, the underlying factual allegations for each cause of action are slightly different: "The core of Jonns' claim for breach of fiduciary duty is that Fischbarg represented both the buyer and the seller during the business transactions over the Charles Restaurant . . . whereas the crux of his claim for legal malpractice is that he has become personally liable for the losses of the business because Fischbarg failed to draft the purchase agreement as being between Dorsia and an LLC, which would have absolved Jonns of that liability." (Doc. 46 at 16.) Although Jonns' complaint included a laundry-list of factual allegations for his legal malpractice claim—some of which actually pertain to a breach of fiduciary duty, such as the allegation that Fischbarg "simultaneously represent[ed] both [Jonns] and Dorsia" (Doc. 41 at 9)— his complaint has a narrowly tailored set of facts for his breach of fiduciary duty claim (id. at 11-12). Thus, contrary to Fischbarg's arguments, the allegations underlying each claim therefore do not "almost exactly track" (Doc. 51 at 21) one another.
After carefully considering the parties' arguments, the motion for reargument is denied.
b. Jonns' Cross Motion to Consolidate.
Motions to consolidate pursuant to CPLR 602 are made as a means to further judicial economy. (See Braun v Fraydun Realty Co., 158 AD2d 430, 431 [1st Dept 1990].) Specifically, consolidation avoids "two-track" litigation by having the parties' claims heard in one action when those claims are interrelated. (Id.) Absent a showing of prejudice, courts may therefore grant consolidation when the separate actions "involve the same parties, and essentially the same questions of law and fact." (43d St. Deli v. Paramount Leasehold, L.P., 89 AD3d 573, 573-74 [1st Dept 2011].) The party opposing a motion to consolidate must show that granting the motion will cause it prejudice. (See Vigo S. S. Corp. v Marship Corp. of Monrovia, 26 NY2d 157, 161 [1970].) The decision whether to consolidate is one to be made in the Court's discretion. (See Murphy v 317-319 Second Realty LLC, 95 AD3d 443, 445 [1st Dept 2012].)
Jonns' cross motion to consolidate must be denied for three reasons. First, the instant action and the Fischbarg action have widely distinct legal issues. At the risk of repetition, Jonns' action against Fischbarg concerns causes of action for legal malpractice and breach of fiduciary duty. (See Doc. 42.) The complaint in the Fischbarg action, on the other hand, asserts three causes of action for breach of contract, unjust enrichment, and an account stated. Second, the two actions have separate factual allegations. The instant action is premised on Fischbarg's allegedly negligent mishandling of a 2010 transaction and his subsequent failure to rectify his conduct (see Doc. 42), whereas the Fischbarg action is based on an agreement made between Fischbarg and Jonns in September of 2012. In fact, that the two actions are premised on different facts is underscored by the fact that the Fischbarg action includes a defendant other than Jonns. Finally, Fischbarg would be prejudiced by "undue delay," especially given the fact that the two actions share a paucity of legal and factual issues. (See Ambac Assur. Corp. v Countrywide Home Loans, Inc., 94 AD3d 455, 456 [1st Dept 2012].) Thus, in its discretion, this Court denies Jonns' cross motion.
The complaint in the Fischbarg action can be found on NYSCEF as Document 1 under Fischbarg v Jonns, Supreme Court, New York County Index Number 654695/2018.
See id.
See id.
For the foregoing reasons, it is hereby:
ORDERED that defendant Gabriel Fischbarg's motion for reargument (motion sequence 002) is denied in its entirety, and this Court adheres to its original decision; and it is further
ORDERED that plaintiff Christopher Jonns' cross motion to consolidate the instant action with another action is denied; and it is further
ORDERED that, within 30 days after this decision and order is filed with NYSCEF, defendant's counsel is to serve a copy of this order, with notice of entry, on plaintiff and on the Clerk of this Court; and it is further
ORDERED that the parties are to appear for a status conference on September 17, 2019, at 2:15 PM at 80 Centre Street, Room 280; and it is further
ORDERED that this constitutes the decision and order of this Court. 7/3/2019
DATE
/s/ _________
KATHRYN E. FREED, J.S.C.