Opinion
Index No. 523732/2022 Motion Seq. No. 5
09-24-2024
OCEAN PARK APARTMENTS, INC. and 430 OCEAN PARKWAY TOWER LLC, Plaintiff, v. MAXEM REALTY LLC, ERIC MARKEL, SHEIK SADDICK, ALMARC REALTY CORP., ANATOLY FIN GERMAN., and GETTRY MARCUS CPA, P.C., Defendants, MAXEM REALTY LLC and SHEIK SADDICK, Counterclaim P1aintiffs, v. TUREK ROTH GROSSMAN LLP,. ALLEN M. TUREK, JEREMY S. ROTH, JASON GROSSMAN, and JOHN DOES #1 THROUGH #10, the names being fictitious and unknown additional counterclaim defendants, being additional persons or entities which received transfer of the assets of TUREK ROTH GROSSMAN, LLP, Additional Counterclaim Defendants,
Unpublished Opinion
PRESENT: HON. LEON RUCHELSMAN, JUDGE
DECISION AND ORDER
HON. LEON RUCHELSMAN, JSC
The counterclaim defendants Turek Roth Grossman LLP and Allen Turk [hereinafter 'TRG'] move pursuant to GPLR §3211 seeking to dismiss the fifth and sixth counterclaims alleging malpractice and fraud respectively. The counterclaim plaintiffs oppose the motion. Papers were submitted by the parties and arguments., held. After reviewing all the arguments this court now makes the following determination.
As recorded in prior decisions, on June 23, 2022 the defendants/counterclaim plaintiffs Maxem Realty LLC and Sheik Saddick sold 100% of the shares of a cooperative as well as the proprietary leases regarding property located at 420/430 Ocean Avenue in Kings County to the- plaintiffs. The Complaint alleges the defendants failed to furnish various financial documents that were required to close arid that the plaintiffs agreed to close simply to secure the agreement. Further, the Complaint alleges the defendants failed to furnish various bank accounts and withheld, funds, that belong to the plaintiffs.
The defendants Maxem Realty and Sheik Saddick filed an answer and asserted counterclaims. Relevant to this motion the fifth .counterclaim alleges' legal malpractice against TRG. The basis for this counterclaim is that TRG was hired by Maxem to submit an amendment, namely the 6th Amendment, to the cooperative's offering plan to be submitted to the Attorney General. The plaintiff 430 Ocean Parkway Tower LLC was also represented by the same law firm, namely TRG, concerning this amendment and any conflict was waived by the parties. Concerning negotiations about the actual purchase and the purchase agreement, TRG continued to represent the plaintiff while Maxem secured new counsel. The fifth counterclaim alleges that when the Amendment was filed it did not contain language Concerning cash reserves/ that. Maxem intended to disburse to its shareholders. The counterclaim argues if such language would have been included this entire lawsuit could have been avoided. Further, the 6th Amendment contained information that, was not disclosed to Maxem before it was filed. Thus, the counterclaim asserts TRG committed malpractice and damaged Maxem by essentially preventing them recovering the cash reserves. To be sure, the cash reserves are at the heart of this litigation. The sixth counterclaim alleges that TRG has since ceased operations and transferred assets in violation of Debtor Creditor Law § 273 and § 276. TRG has now moved seeking to dismiss those counterclaims on the grounds they fail to state any cause of action. As noted, the motion is opposed.
Conclusions of Law
It is well settled that upon a motion to dismiss the court must determine, accepting the allegations of the complaint as true, whether the party can succeed upon any reasonable view of those facts (Perez v. Y & M Transportation Corporation, 219 A.D.3d 1449, 196 N.Y.S.3d 145 [2d Dept., 2023]"). Further, all the allegations in the complaint, are deemed true and all. reasonable inferences may be drawn in favor of the plaintiff (Archival Inc., v. 177 Realty Corp., 220 A.D.3d 909, 198 N.Y.S.2d 567 [2d Dept. 2023]) . Whether the complaint will later survive a motion for summary judgment, or whether the plaintiff will ultimately be able to prove its claims, of course, plays no part in the determination of a pre-discovery CPLR §3211 -motion to dismiss' (see, Lam v. Weiss, 219 A.D.3d 713, 195 KYS3d 488 [2d Dept., 20231])
To succeed on a claim for legal malpractice it must be shown that the attorney failed to act .with the "ordinary reasonable skill and knowledge commonly possessed by a. member of the legal profession "(Darby & Darby, P.O, v. VST international, Inc., 95 N.Y.2d 308, 716 N.Y.S.2d 378 [2000])- Preliminarily, of course, the party must demonstrate the existence, of an attorney-client relationship (Zhang v. Lau, 210 A.D.3d 829, 178 N.Y.S.3d 545 [2d Dept., 2022]). To .establish and attorney-client relationship "there must be an explicit undertaking to perform a specific task" (Willoughby Rehabilitation and Health Care. Center LLC v. Webster, 190 A.D.3d 887, 136 N.Y.S.3d 753 [2d Dept., 2.021]). Thus, the actions of the parties is the determining fact whether such relationship existed (Wei Cheng Chang v. Pi, 288 A.D.3d .378, 733 N.Y.S.2d 471 [2d Dept., 2001]).
Maxem asserts that TRG represented them in drafting the 6th Amendment and the failure to disclose the treatment of the reserve fund caused: this entire lawsuit. The question that must be addressed is whether TRG ever had an attorney-client relationship with Maxem. The counterclaim alleges that "on or about March 8, 2022, Maxem retained TRG as its. counsel to prepare, and submit an amendment to the Cooperative's Offering Plan ("6th Amendment") to be filed with the. Attorney General of the State of New York ("AG")" (see, Counterclaims, ¶ 289 [NYSCEF Doc, No. 53]). Notably, that date is the same date the Purchase and Sale Agreement was dated and there is no contention TRG represented Maxem in that transaction. In. fact, the Purchase and Sale Agreement specifically provides that Maxem as seller is represented by Federman Steifman LLP (Purchase and Sale Agreement., ¶¶3.1, 4.3, 19 [NYSCEF Doc. No. 10]). In any event, the following day Allen Turek sent a letter to Lee Edelson Esq., an attorney with Federman Steifman LLP, as counsel to Maxem, stating four times that Maxem was Edelson's client, requesting, information to be able to complete the necessary amendment (see., Turek Roth Grossman LLP Memorandum. [NYSCEF Doc.. No. 104]) . A few weeks later Mr. Turek forwarded a draft of the amendment to Maxem's counsel among others, for- review and. comment (see., Email from Allen Turke, dated March 30, 2022 at 5:42 PM [NYSCEF Doc. No. 105]) . Later, that same day Mr. Turek sent another email to Michael Federman Esq., another member of Federman Steifman LLP, counsel to Maxem, specifically stating that he was "not comfortable" providing legal advise to Maxem and would not dp so (see, Email from Allen Turke, dated March 30, 2022 at 6:06 PM [NYSCEF Doc. No. 106]). Further, numerous emails between Mr. Turek and attorneys for Maxem demonstrate that Maxem was not represented by TRG at all and had secured its own counsel.
Maxem argues that there are questions of fact whether TRG represented them concerning the 6th Amendment and that it is improper to conflate the undisputed fact Maxem was represented by others concerning the Purchase and Sale Agreement with this disputed contention.. Maxem further argues that only Maxem as sponsor could prepare and file the 6th Amendment, therefore, "it follows that TRG could only be acting as counsel for Maxem -whether or not TRG was simultaneously co-counsel for 430 Ocean" (Memorandum in Opposition, page 8 [NYSCEF Doc. No. 128]).
However, the Purchase and Sale Agreement specifically states otherwise. It states that ""Purchaser and Seller agree that the office of Turek Roth Grossman LLP (Purchaser's attorneys), coordinating and. in. consultation with. Erica Buckley at Nixon Peabody LLP, shall each be retained to prepare and submit the Update Amendment and coordinate, all correspondence with the A.G. Purchaser and Seller each waive any conflict of interest which may exist with respect to Turek Roth Grossman LLP and Nixon Peabody LLP acting as the law firms to coordinate the preparation and filing of the Update: Amendment" (see, Purchase and Sale Agreement, ¶9.2 [NYSCEF Doc. No. 10]). Maxem concedes that clause indicates TRG. was only "counsel for the plaintiff. However, Maxem argues that "those words can also be read to say that TRG was the purchaser's attorneys for the PSA" (Emphasis in Original, Memorandum in Opposition, page 9 [NYSCEF Doc. No. 128]). . Maxem. further insists that such a reading is "not a stretch" (id) because otherwise there would be no need to include waiver language. However, a more natural reading of the clause simply assigns the duty to prepare the amendment to. plaintiff's counsel, even though it may be primarily Maxem's responsibility. The court need not speculate why this transfer of authority was made, however, it does hot mean that TRG now represented Maxem. This is further Supported by the fact TRG sent numerous emails to Mexem's actual counsel seeking comment. If TRG really represented Maxem in preparing and submitting the amendment there would have been no need for TRG to consult with Federman Steifman LLP at all. The simple fact it was necessary for TRG to actually engage with Federman Steifman LLP completely undermines any possibility that TRG actually represented Maxem. It may be unusual for buyer's counsel to prepare documents, required of the seller. It may be common practice since the buyer is the party that will benefit from the amendment. To the extent buyer agreed to prepare the amendment in this instance,: the waiver language served to protect against any potential litigation in the future..
Moreover, Federman Steifman LLP as actual counsel to Maxem who reviewed all the documents, prepared did not raise the objection, which forms- the basis of the malpractice claim. It is curious that Maxem would seek to sue counsel which it does maintain any relationship instead of its retained counsel. In any event, there are no acts which demonstrate any attorney client relationship at all. Therefore, based on the foregoing, the- motion- seeking to dismiss the fifth counterclaim is granted as to all parties.
Turning to the sixth counterclaim, Maxem .asserts allegations of fraudulent transfers committed by TRG in violation of Debtor Creditor Law §273 and §276.
It is well settled that pursuant to §273 of the Debtor. Creditor Law every conveyance made by a party which then renders the party insolvent is fraudulent without regard to intent if the conveyance is made without fair consideration (Paragon v. Paragon, 164 A.D.3d 1460, 84 N.Y.S.3d 582 [2d Dept., 2018]). Debtor Creditor Law former §276 states that "every conveyance made . . .with actual intent... to hinder, delay, or defraud either present or future, creditors, is fraudulent" (id) . Thus, a. creditor must demonstrate, by clear and convincing evidence that a defendant had the actual intent to hinder, delay or defraud creditors (see, Jensen v. Jensen,- 256 A.D.2d 1162, 682 N.Y.S.2d 774 [2d Dept., 1998]). The- fraudulent transfer law contained within the Debtor Creditor Law is designed to prevent debtors from avoiding the payment of their debts (Leifer v. Murphy, 149 Misc. 455, 267 NYS 701 [Supreme Court Bronx County 1933]). Preliminarily, it must be demonstrated that Maxem is a 'creditor' of TRG. A creditor is "a person having any claim, whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent" (see, Debtor and Creditor Law §270) . In this. instance, Maxem does not maintain any claims against TRG and thus cannot pursue claims based upon the debtor creditor law.
Therefore, the motion seeking to dismiss the sixth counterclaim is granted as to all parties.
So ordered.