Summary
denying summary judgment for defendant law firm on legal malpractice claim where attorney's negligence may have influenced plaintiff's decision to pursue suit
Summary of this case from Fredericks v. Chemipal, Ltd.Opinion
No. 00 Civ. 9624 (DLC).
September 2, 2004
Kevin M. Costello, Lutz, Levow Costello, P.A., Cherry Hill, New Jersey, for the Plaintiff.
Mark K. Anesh, Eric Crusius, Wilson, Elser, Moskowitz, Edelman, Dicker, LLP, New York, New York, for the Defendants.
OPINION AND ORDER
From August 7, 1993 to March 20, 2001, Arthur M. Wisehart and Wisehart Koch (collectively, "Wisehart" or "defendants") represented Charles S. Polin ("Polin") in connection with Polin's claims against his former employer, The Kellwood Company ("Kellwood"). On August 14, 2001, Polin filed the instant action, alleging that Wisehart committed malpractice in representing Polin at an arbitration of Polin's claims against Kellwood. Defendants now move for summary judgment on Polin's claim, as well as on the defendants' counterclaim for unpaid fees and expenses. For the reasons stated below, the defendants' motions for summary judgment are denied. Background
The arbitration that preceded this action is described inPolin v. Kellwood Co., 103 F. Supp. 2d 238 (S.D.N.Y. 2000). Familiarity with that Opinion is assumed. The facts described here are undisputed or taken in the light most favorable to the plaintiff.
In July 1991, Polin commenced employment as the president of Kellwood's start-up junior's division of women's clothing. Over the course of the next sixteen months, Polin's division suffered substantial financial losses. Polin's employment was terminated on June 1, 1993. In early August, Polin consulted with Wisehart regarding a possible "exit strategy" from Kellwood that would allow him to obtain a favorable severance package. During their meeting, Wisehart allegedly informed Polin that he felt Polin had an "excellent" and "slam dunk" case against Kellwood. According to Polin, Wisehart led him to believe that litigation was "an appropriate avenue" through which Polin could address his concerns, and that the expenses Polin would incur during the litigation "would be appropriately risked."
On August 7, Wisehart and Polin executed a retainer agreement in which Polin authorized Wisehart to bring, inter alia, an age discrimination claim against Kellwood on his behalf. The retainer agreement specified that Wisehart would assume the case on a partial contingency basis. On November 10, Wisehart commenced an action in the Southern District of New York on behalf of Polin against Kellwood and several of its executives in which Polin alleged that: (1) he had been fraudulently induced to accept the position at Kellwood; (2) an executive at Kellwood had tortiously interfered with Polin's contractual relations with the company; and (3) Polin had been fired because of his age.
On January 15, 1997, Polin and Wisehart entered into an amended retainer agreement. Both the retainer agreement and the amended retainer agreement required Polin to pay Wisehart and his law firm a minimum of $100 per hour for work spent in furtherance of his case, in addition to a contingency fee. The amended retainer agreement increased the contingency fee from 25% to 45% of the gross value of any recovery. The amended retainer agreement also specified that Polin would "advance the sums necessary for any and all reasonable disbursements and expenses" incurred by the law firm on his behalf.
On February 25, 1998, after four years of protracted and acrimonious discovery, the parties agreed to submit the dispute to arbitration. On October 14 of that year, without written opinion, the arbitration panel granted in part Kellwood's motion for "judgment on the partial findings," dismissing Polin's claims for age discrimination and fraudulent inducement. Martin Freeman ("Freeman"), one of the three arbitrators, dissented from the panel's dismissal of the two claims.
In a written opinion dated April 10, 1999 ("April 10 Opinion"), the arbitrators dismissed Polin's remaining tortious interference claim for lack of evidence. The April 10 Opinion set forth the panel's reasoning for dismissing the tortious interference claim, as well as for the October 14, 1998 dismissal of Polin's fraudulent inducement and age discrimination claims. The panel observed that Polin "did not present any evidence" supporting an essential element of a fraudulent inducement claim, that is, that Kellwood had made representations that it knew to be false in order to induce Polin to accept employment at Kellwood. Referring to the tortious interference claim, the arbitration panel found that "the framing of the events at issue into a complaint alleging tortious interference is simply unfounded on the facts and the law." The panel found that Polin was fired because he was "in over his head," and that "Polin's position is long on argument and short on facts."
Freeman dissented in writing to the panel's dismissal of the tortious interference claim. It is unclear whether he preserved his dissent to the earlier dismissal of the age discrimination and fraudulent inducement claims, since he did not restate his dissent in the April 10 Opinion, which is the only written opinion produced by the arbitration panel.
In opposition to summary judgment, the plaintiff offers only his own affidavit and the arbitrators' April 10 Opinion. On its face, the April 10 Opinion appears to constitute hearsay evidence if offered for its truth. Since the defendant has not objected to consideration of the April 10 Opinion, it has been relied upon here. If any party wishes to rely on the April 10 Opinion at trial for the truth of its contents, he will be required to address its admissibility.
As to the age discrimination claim, the panel found that there was "no evidence to support it," that it was "frivolous," and that Polin did not have "even a colorable claim." The arbitration panel sanctioned Wisehart for bringing the age discrimination claim, noting that he should have known that such a claim was meritless. The panel concluded that Wisehart had asserted the claim "to justify a claim for counsel fees pursuant to the New York Human Rights Law." According to the panel, "[i]t cannot be reasonably inferred from the record at hand that this claim was brought in good faith." In addition to pursuing a frivolous age discrimination claim, the panel found that Wisehart had committed several breaches of professional ethics during the course of the arbitration. Accordingly, the panel sanctioned Wisehart and awarded Kellwood damages against Wisehart of $153,237.64.
The panel found that Polin had presented no evidence to support his age discrimination claim other than the fact that he was within the protected age group when hired. The panel noted that the person hired by Kellwood to replace Polin was also within the protected age group.
The panel found that Wisehart: (1) had made "false representations" with regard to an offer of proof on behalf of a key witness, and that the witness's testimony turned out to be "at significant variance from Wisehart's representations"; (2) had falsely accused Kellwood and its counsel of interfering with witness testimony, of maintaining false financial documents, and of destroying evidence; 3) had improperly recorded a telephone conference with the arbitration panel chair and Kellwood's counsel without telling either party; 4) had unduly prolonged the hearings by a constant repetition of questions, and spurious objections; and 5) had committed a contempt of the panel by sending a letter to the American Arbitration Association before the proceedings had terminated containing false and unsubstantiated statements about the chair.
On June 29, 2000, the Honorable Richard Owen confirmed the arbitrators' decision on the merits, including the sanction against Wisehart. Kellwood, 103 F. Supp. 2d at 268. On August 14, Polin commenced the instant action, charging Wisehart with legal malpractice. In his opposition to this motion, Polin withdraws any theory of liability predicated on Wisehart's negligence in `litigating Polin's action before the arbitration panel. Polin's sole remaining theory of malpractice against Wisehart is that Wisehart negligently advised him to file and filed a lawsuit on Polin's behalf when Wisehart should have known that Polin had no legally cognizable claim for relief against his former employer, and that, by prosecuting the meritless claims, Wisehart caused Polin to suffer monetary losses. Polin contends that, but for Wisehart's advice, he would not have incurred the legal fees associated with the arbitration proceeding. Based on this narrowed understanding of the case, Polin seeks damages in the amount of legal fees he has paid to Wisehart, as well as other expenses he has incurred in connection with this action, and a release from any obligation to pay Wisehart under the retainer agreement.
Wisehart moves for summary judgment on Polin's legal malpractice claim. According to Wisehart, Polin does not state a cause of action under New York law for legal malpractice, and, even if he were able to state a cause of action, Polin's recovery would be barred by the doctrine of "unclean hands." Wisehart also moves for summary judgment on his counterclaim for the payment of outstanding fees owed by Polin in connection with Wisehart's representation of Polin in his lawsuit against Kellwood. Discussion
According to documentation supplied by Wisehart, the amount outstanding as of August 1998 totals $114,525.47, plus interest. Wisehart also requests a hearing to determine the total of unbilled expenses and legal fees for the period following August 1998. According to Wisehart, starting on August 19, 1998, he stopped billing Polin for his work based on Polin's representation that he was experiencing financial difficulties.
Summary judgment may not be granted unless the submissions of the parties taken together "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Rule 56(c), Fed.R.Civ.P. The moving party bears the burden of demonstrating the absence of a material factual question, and in making this determination the court must view all facts in the light most favorable to the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). When the moving party has asserted facts showing that the non-movant's claims cannot be sustained, the opposing party must "set forth specific facts showing that there is a genuine issue for trial," and cannot rest on the "mere allegations or denials" of the movant's pleadings. Rule 56(e), Fed.R.Civ.P.; accord Burt Rigid Box, Inc. v. Travelers Property Cas. Corp., 302 F.3d 83, 91 (2d Cir. 2002).
Subject Matter Jurisdiction
The first issue to be addressed is whether there is federal subject matter jurisdiction over this action. Even if the parties do not raise the issue of jurisdiction, it is the "obligation of a court, on its own motion, to inquire as to subject matter jurisdiction and satisfy itself that such jurisdiction exists."Da Silva v. Kinsho Intern. Corp., 229 F.3d 358, 361 (2d Cir. 2000).
Parties seeking to invoke diversity jurisdiction must be of diverse citizenship and the amount in controversy must exceed the sum or value of $75,000, exclusive of costs and interest. 28 U.S.C. § 1332(a). The amount in controversy requirement of Section 1332(a) is determined at the time the complaint is filed. Scherer v. Equitable Life Assurance Society of U.S., 347 F.3d 394, 397 (2d Cir. 2003); Wolde-Meskel v. Vocational Instruction Project Community Services, Inc., 166 F.3d 59, 62 (2d Cir. 1999). There is a presumption that the face of a complaint is a good faith representation of the actual amount in controversy, which presumption can only be rebutted by showing to "a legal certainty that the amount recoverable does not meet the jurisdictional threshold." Scherer, 347 F.3d at 397 (citation omitted). "Events occurring subsequent to the institution of suit which reduce the amount recoverable below the statutory limit do not oust jurisdiction." Wolde-Meskel, 166 F.3d at 62 (citing St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289-90 (1938)).
There is no dispute over the diversity of citizenship of the parties.
At the time Polin filed this lawsuit, he claimed damages against the defendants in excess of $75,000. His complaint alleged that the defendants "bilked plaintiff well in excess of $150,000 for his services," and "proximately caused" him to suffer monetary losses such as legal fees, an "opportunity to resolve the claim via settlement," and "damages which would have flowed from the case had the matter been successfully concluded." The defendants have not argued that the jurisdictional allegations in Polin's complaint were made in a bad faith attempt to create federal diversity jurisdiction. See Scherer, 347 F.3d at 402 ("the legal impossibility of recovery must be so certain as virtually to negative the plaintiff's good faith in asserting the claim" (citation omitted)).
Polin's submissions suggest that the amounts he currently seeks to recover in this lawsuit are approximately $12,000 in legal fees he has already paid to the defendants, $32,000 in expenses incurred in the underlying action, and punitive damages. He also seeks to be relieved of any obligation to pay the approximately $114,000 in legal bills submitted by Wisehart and any additional fees purportedly owed under the retainer agreement. Given all of these facts, there is no basis to rebut the presumption that the complaint brought claims for sums in excess of the jurisdictional requirement and that there is federal subject matter jurisdiction over this action.
In his complaint, Polin claimed punitive damages well in excess of the jurisdictional amount for, inter alia, Wisehart's "intentional failure to communicate Kellwood's offer to negotiate and instead replying with a demand of $2,000,000 against plaintiff's express wishes that any demand would have been in the $200,000 to $300,000 range." Polin continues to seek punitive damages.
Punitive damages can be included in calculating the jurisdictional amount so long as they are legally recoverable under the applicable state law. See AFA Tours, Inc. v. Whitchurch, 937 F.2d 82, 87 (2d Cir. 1991). Punitive damages may be recovered in New York on a claim of legal malpractice. See Smith v. Lightning Bolt Prods., 861 F.2d 363, 373 (2d Cir. 1988) (punitive damages permissible in a legal malpractice action because the defendants had "violated the duties that arose from their relationships of trust and confidence with [the plaintiff] and so grossly disregarded those duties that their conduct exhibited a high degree of moral culpability").
Polin's Legal Malpractice Claim
Under New York law, to prevail on a claim for legal malpractice, a plaintiff must prove that his attorney
The parties do not dispute that New York law governs their relationship.
failed to exercise that degree of care, skill and diligence commonly possessed and exercised by an ordinary member of the legal community, that such negligence was the proximate cause of the actual damages sustained by plaintiff, and that but for the attorney's negligence, plaintiff would have been successful in the underlying action.Carney v. Philippone, 332 F.3d 163, 167 (2d Cir. 2003) (citation omitted); see also Pistilli v. Gandin, 780 N.Y.S.2d 293, 293 (2d Dep't 2004); Reibman v. Senie, 756 N.Y.S.2d 164, 164 (1st Dep't 2003). To succeed on a summary judgment motion, a defendant is required to "present evidence in admissible form establishing that plaintiff is unable to prove at least one of these elements." Ehlinger v. Ruberti, Girvin Ferlazzo, P.C., 758 N.Y.S.2d 195, 196 (3d Dep't 2003) (citation omitted); see Carney, 332 F.3d at 167.
In order to prevail, Wisehart bears the burden of showing that Polin is unable to prove that (1) Wisehart "failed to exercise the skill commonly exercised by an ordinary member of the legal community" in advising Polin to file the lawsuit or in filing the lawsuit; (2) such negligence proximately caused Polin to incur legal fees and expenses associated with the arbitration; and (3) but for that negligence, Polin would not have filed the action against Kellwood.
Wisehart has not shown that he is entitled to a judgment in his favor on Polin's legal malpractice claim. Although an attorney is not liable for committing "an honest mistake of judgment where the proper course is open to reasonable doubt," Walter D. Peek Inc. v. Agee, 652 N.Y.S.2d 359, 361 (3d Dep't 1997) (citation omitted), it follows that when an attorney recommends anunreasonable course of conduct he may be liable. For example, under New York law, an attorney may be liable due to his ignorance of the rules of practice, his failure to comply with conditions precedent to suit, his neglect to prosecute or defend an action, or his failure to conduct adequate legal research.Shopsin v. Siben Siben, 702 N.Y.S.2d 610, 612 (2d Dep't 2000). An attorney may also be found negligent for failing to advise his client adequately, since an attorney has a duty to keep his client well informed and furnish him with all the "information material to the client's decision to pursue a given course of action, or to abstain therefrom." Spector v. Mermelstein, 361 F. Supp. 30, 40 (S.D.N.Y. 1972) (emphasis supplied), aff'd in relevant part, 485 F.2d 474 (2d Cir. 1973).See also Schweizer v. Mulvehill, 93 F. Supp. 2d 376, 397 (S.D.N.Y. 2000) (negligent or willful withholding of information material to the client's decision to pursue a course of action is a breach of duty of due care). Thus, negligence may be found where an attorney advises his client to file, and files on his behalf, an action which he knows or should know is meritless and frivolous. See, e.g., Rule 11, Fed.R.Civ.P.
Whether Wisehart failed to exercise the degree of skill commonly exercised by an ordinary attorney when he recommended and filed the lawsuit on behalf of Polin is a question of fact for the jury to determine. Moreover, Polin has presented evidence to show that Wisehart's alleged negligence in filing the suit was the proximate cause of Polin's legal fees and expenses. He asserts that, but for Wisehart's negligent advice, he would not have filed a lawsuit against Kellwood and incurred those legal fees.
Wisehart asserts that Polin is barred from any recovery based on Wisehart's negligence by the doctrine of "unclean hands," to wit, Polin's failure to prevail at the arbitration due to his own "incredible" testimony. The doctrine of unclean hands is an "equitable defense and unavailable in an action seeking money damages." Nomura Securities Intern., Inc. v. E*Trade Securities, Inc., 280 F. Supp. 2d 184, 196 (S.D.N.Y. 2003). See PenneCom B.V. v. Merrill Lynch Co., Inc., 372 F.3d 488, 493 (2d Cir. 2004). Because Polin is not suing in equity, but rather seeks damages at law, Wisehart cannot avail himself of the defense of unclean hands.
Wisehart's Counterclaim for Fees and Expenses
Wisehart also seeks summary judgment on his counterclaim for billed fees and expenses, and a hearing to determine the total amount that Polin owes him. Because issues of fact remain, the motion for summary judgment on the counterclaim for fees is denied.
The crux of Polin's malpractice claim is that, but for the legal malpractice committed by Wisehart in advising him to file and filing the meritless lawsuit, Polin would never have incurred the fees and expenses of the arbitration proceeding. Polin relies on the arbitration panel's April 10 Opinion to show that the age discrimination claim was "frivolous," and that the other claims were unsupported by evidence. Thus, Polin has raised issues of fact as to whether he owes Wisehart any legal fees and expenses in connection with the arbitration proceeding.
Conclusion
For the reasons stated above, the defendants' motions for summary judgment are denied.
SO ORDERED.