Opinion
8565-05.
Decided April 18, 2006.
LAW OFFICES OF THOMAS F. LIOTTI, Garden City, New York, Attorney for Plaintiffs.
MELITO ADOLFSEN, P.C., New York, New York, Attorneys for Defendants Stavis Kornfeld, Esqs., and Roger L. Stavis, Esq.
FARRELL FRITZ, P.C., Uniondale, New York, Attorneys for Defendant Computer Associates International, Inc.
KAYE SCHOLER, LLP, New York, New York, Attorneys Pro Se and for Defendant Jane W. Parver, Esq.
DAVIS POLK WARDWELL, New York, New York, Attorneys for Defendant Sanjay Kumar.
ORDERED that the motion by defendant Sanjay Kumar to dismiss the complaint for failure to state a cause of action under CPLR 3211(a)(7) is granted; and it is further
ORDERED that the motion by defendant Computer Associates International, Inc to dismiss the complaint for failure to state a cause of action under CPLR 3211(a)(7) is granted; and it is further
ORDERED that the motion by defendants Kay Scholer, LLP, and Jane W. Parver, Esq., to dismiss the complaint for failure to state a cause of action under CPLR 3211(a)(7) is denied; and it is further
ORDERED that the motion by defendants Stavis Kornfeld, Esqs., and Roger L. Stavis, Esq., to dismiss the complaint for improper service of process is referred to a traverse hearing, which shall be held on June 27, 2006 at 10:00 a.m., Supreme Court, Courtroom 7, Arthur M. Cromarty Criminal Court Building, 210 Center Drive, Riverhead, New York 11901.
This is an action to recover damages for defamation, wrongful termination, promissory estoppel, conspiracy, and legal malpractice. Plaintiffs are former employees of defendant Computer Associates International, Inc. (hereinafter CA). Their employment with CA was terminated on or about April 2004. The complaint alleges that the terminations occurred following plaintiffs' participation in meetings with attorneys from the law firm of Sullivan Cromwell, LLP, during which they were questioned about an internal investigation initiated by the Board of Directors of CA regarding internal accounting practices.
Plaintiffs allege that the following statements, which were included in CA's 2004 Annual Report, were untrue and defamatory towards them:
"The analysis included a review of arrangements where customer signatures were obtained late as well as where the customer signature was timely but our countersignature was obtained late. The analysis also included a review of other revenue recognition requirements so as to ensure the accuracy and completeness of the restatement."
". . . including a practice of holding the financial period open after the end of the fiscal quarters, providing customers with contracts with preprinted signature dates, late countersignatures by Company personnel, backdating of contracts, and not having sufficient controls to ensure the proper accounting under SOP 97-2. In addition, the Audit Committee found that certain former executives and other personnel were engaged in the practice of Acleaning up@ [sic] contracts by, among other things, removing fax time stamps before providing agreements to the outside auditors. These same executives and personnel also misled our outside counsel, and accounting advisers regarding these accounting practices. We believe that we now have the adequate systems and controls in place to assure proper treatment of revenue recognition under our current Business Model and are considering additional improvements." (Complaint, ¶ 49).
Plaintiffs also allege that they were wrongfully terminated without just cause or reason; that CA promised them continued employment as well as bonuses, additional compensation, and other benefits if they continued to follow the defendants' orders; that plaintiffs relied upon these promises to their detriment; and that defendants conspired to defame and wrongfully terminate them, which caused them to loose benefits and suffer harm to their professional reputations.
The plaintiffs further allege causes of action sounding in legal malpractice against defendants Kaye Scholer and Jane Parver, a partner at Kaye Scholer. The plaintiffs allege that Kaye Scholer and Jane Parver gave erroneous and incorrect legal advice to plaintiff Irene Salvatore and failed to disclose the existence of a conflict of interest, breaching their fiduciary duty to her and causing her to be wrongfully terminated and to suffer damages to her profession and reputation. The plaintiffs similarly allege causes of action sounding in legal malpractice against Stavis Kornfeld and Roger Stavis, one of its partners, for breach of their fiduciary duty to plaintiff Brian Wright. The plaintiffs allege that Stavis Kornfeld and Roger Stavis failed to disclose the existence of a conflict of interest and gave erroneous and incorrect legal advice to Wright. Plaintiffs also allege in support of their malpractice claims that plaintiffs Salvatore and Wright were accompanied by counsel retained by CA on their behalf during interviews about the internal investigation. Since the law firms of Kaye Scholer and Stavis Kornfeld were retained and paid by CA, the plaintiffs contend that these firms, as well as Jane Parver and Roger Stavis, the partners who actually represented the plaintiffs, had a conflict of interest which they should have disclosed to plaintiffs and that their failure to make such disclosure amounted to legal malpractice.
Defendants Sanjay Kumar, CA, Kay Scholer, and Jane Parver move to dismiss the complaint for failure to state a cause of action under CPLR 3211(a)(7). In addition, defendants Stavis and Stavis Kornfeld move to dismiss for improper service of process.
On a motion to dismiss a complaint pursuant to CPLR 3211(a)(7) for failure to state a cause of action, "the court must determine whether, accepting as true the factual averments of the complaint and according the plaintiff the benefits of all favorable inferences which may be drawn therefrom, the plaintiff can succeed upon any reasonable view of the facts stated" ( Thoubboron v. Convery, 306 AD2d 521, 522, 761 NYS2d 847, 848 [2nd Dept 2003], quoting Board of Educ. v. County of Westchester, 282 AD2d 561, 562, 724 NYS2d 422). The complaint is to be liberally construed, and the plaintiff accorded the benefit of every possible favorable inference ( see Rochdale Village, Inc. v. Zimmerman, 2 AD3d 827, 769 NYS2d 386 [2nd Dept 2003]). The court's function on such a motion is to determine whether plaintiff's allegations fit within any cognizable legal theory, that is whether the plaintiff has a cause of action, and not whether he or she has stated one ( Fast Track Funding Corp. v. Perrone, 19 AD3d 362, 796 NYS2d 164 [2nd Dept 2005]). Additionally, the court may consider affidavits submitted by the plaintiff to remedy defects in the complaint ( Leon v. Martinez, 84 NY2d 83, 614 NYS2d 972).
Plaintiffs' first cause of action is to recover damages for defamation. Defamation is defined "as the making of a false statement which tends to expose the plaintiff to public contempt, ridicule, aversion or disgrace, or induce an evil opinion of him in the minds of right-thinking persons, and to deprive him of their friendly intercourse in society" ( Rinaldi v. Holt, Rinehart Winston, Inc., 42 NY2d 369, 379, 397 NYS2d 943). To establish a cause of action for defamation under New York law, a plaintiff must allege: (1) a false and defamatory statement of fact, (2) regarding the plaintiff, (3) the publication of the statement to a third party, and (4) injury to the plaintiff ( Id. ). Defamation per se is established when the plaintiff shows that the statements at issue "tend to injure [plaintiff] in his or her trade, business or profession" ( Liberman v. Geltstein, 80 NY2d 429, 435, 590 NYS2d 857).
Plaintiffs have failed to allege sufficient facts demonstrating a valid defamation claim. The statements at issue were published as part of CA's 2004 Annual Report and make reference to company executives and personnel, but they do not identify plaintiffs individually.
Given the context in which the publication of the statements occurred, plaintiffs have not established that any person reading the two statements would conclude that they referred to plaintiffs specifically. In addition, plaintiffs have not alleged sufficient facts demonstrating the extent of any injuries to their trade or business as a result of the alleged defamation. Moreover, the statements referring to the accounting practices uncovered by CA's internal investigation are true insofar as these practices were carried out internally, and plaintiffs have not met their burden of establishing the falsity of the statements.
Plaintiffs' second cause of action is for to recover damages wrongful termination.
Under New York law, absent an agreement fixing the duration of employment, there is a "presumption that employment for an indefinite or unspecified term is at will and may be freely terminated by either party at any time without cause or notice" ( Horn v. New York Times, 100 NY2d 85, 91, 760 NYS2d 378, 380, citing Martin v. New York Life Ins. Co., 148 NY 117). The New York Court of Appeals has consistently declined to recognize a common law tort of wrongful discharge ( see Lobosco v. New York Telephone Company/NYNEX, 96 NY2d 312, 727 NYS2d 383); Sabetay v. Sterling Drug, Inc., 69 NY2d 329, 514 NYS2d 209; Murphy v. American Home Prods. Corp., 58 NY2d 393, 461 NYS2d 232; Weiner v. McGraw-Hill, Inc., 57 NY2d 458, 457 NYS2d 193).
In light of the presumption under New York law that, absent an agreement establishing a fixed duration, an employment relationship is presumed to be a hiring at will, terminable at any time by either party ( see, Sabetay v. Sterling Drugs, Inc., supra at 333), plaintiffs are required to allege facts sufficient to demonstrate that their employment with CA was not at will. Plaintiffs have failed to meet their burden. They make no claim that they were promised employment for a fixed duration ( see Hutchinson v. Zurich Scudder Investments, Inc., 290 AD2d 341, 737 NYS2d 25 [1st Dept 2002]). CA was, therefore, entitled to terminate plaintiffs' employment at any time without cause or notice ( see, Horn v. New York Times, supra at 91). Accordingly, CA is entitled to dismissal of plaintiff's wrongful termination cause of action.
Plaintiffs' third cause of action is to recover damages for promissory estoppel. "To establish a viable cause of action sounding in promissory estoppel, a plaintiff must allege (1) a clear and unambiguous promise, (2) reasonable and foreseeable reliance by the party to whom the promise is made, and (3) an injury sustained in reliance on the promise" ( Rogers v. Town of Islip, 230 AD2d 727, 727, 646 NYS2d 158, 158 [2nd Dept 1996]). In this case, given the employment-at-will relationship between plaintiffs and CA, plaintiffs have not alleged sufficient facts to establish that there were clear and unambiguous promises of continuous employment made to them and on which they reasonably relied. Plaintiffs have also failed to establish that they suffered an injury as a result of their reliance on any alleged promises. Plaintiffs' status as employees at will renders their claimed reliance on a promise of continued employment unreasonable and warrants dismissal of the promissory estoppel claim ( see Skillgames, LLC v. Brody, 1 AD3d 247, 767 NYS2d 418 [1st Dept 2003]). In the absence of facts negating the existence of an employment-at-will relationship, the promissory estoppel claim must be dismissed.
Plaintiffs' fourth cause of action is to recover damages for conspiracy. New York tort law does not recognize an independent cause of action for civil conspiracy ( see Sokol v. Addison, 293 AD2d 600, 742 NYS2d 311 [2nd Dept 2002]; Pappas v. Passias, 271 AD2d 420, 707 NYS2d 178 [2nd Dept 2000]). A conspiracy claim must be premised upon an underlying established tort and is used to demonstrate the existence of a common scheme ( Ward v. City of New York, 15 AD3d 392, 789 NYS2d 539 [2nd Dept 2005]). Where the underlying tort claims are dismissed, the conspiracy claim cannot stand ( Sokol v. Addison, supra). Consequently, plaintiffs' claim for conspiracy, which is based on defendants having conspired to defame and wrongfully terminate them, must be dismissed since the defamation and wrongful termination claims have been dismissed.
Plaintiffs' fifth and sixth causes of action allege malpractice against defendants Kaye Scholer, Jane Parver, Roger Stavis, and Stavis Kornfeld. To survive a motion to dismiss a claim for legal malpractice, a plaintiff must allege facts establishing that the attorney failed to exercise that degree of care, skill, and diligence commonly possessed and exercised by a member of the legal community and that the attorney's failure proximately caused damages to the client ( see Estate of Burke v. Peter J. Repetti Co., 255 AD2d 483, 680 NYS2d 645 [2nd Dept 1998]). A plaintiff must allege (1) the existence of an attorney-client relationship, (2) the attorney's negligence in breach of that relationship, (3) proof that the attorney's conduct was the proximate cause of the plaintiff's injury, and (4) proof that, but for the alleged malpractice, the plaintiff would have prevailed in the underlying action ( see Logalbo v. Plishkin, Rubano Baum, 163 AD2d 511, 513, 558 NYS2d 185 [2nd Dept 1990]). It has been held that a legal malpractice claim may arise out of the negligent giving of advice ( see Scheller v. Martabano, 177 AD2d 690, 576 NYS2d 1009 [2nd Dept 1991]; Marks Polarized Corporation v. Solinger Gordon, 124 Misc 2d 266, 476 NYS2d 743 [Sup Ct Queens Co 1984]). Similarly, a legal malpractice claim may arise out of the failure to give advice to a client ( see Darby Darby, P.C. v. VSI Intern., Inc., 95 NY2d 308, 716 NYS2d 378; Stolmeier v. Fields, 280 AD2d 342, 721 NYS2d 313 [1st Dept 2001]).
The complaint alleges sufficient facts to defeat defendants' motion to dismiss the legal malpractice claim of plaintiff Salvatore. The evidence establishes that there was an attorney-client relationship, as evidenced by the letter dated January 8, 2004, submitted by Kaye Scholer to plaintiff Salvatore. The evidence also establishes that defendants Kaye Scholer and Parver were compensated by CA for their representation of plaintiff. Plaintiff Salvatore alleges that defendants Kaye Scholer and Jane Parver committed malpractice when they failed to disclose the existence of a conflict of interest and when they failed to advise her as to the possible consequences of her cooperation with the internal investigation. Accepting the factual averments of the compliant as true, the court finds that plaintiff Salvatore has alleged sufficient facts to support a claim of legal malpractice, and defendants' motion to dismiss that claim is consequently denied.
Plaintiff Wright alleges a claim for legal malpractice against defendants Stavis Kornfeld and Roger Stavis, who move to dismiss the complaint on the basis of improper service of process. They argue that plaintiffs effected service at a location where they had not conducted business in approximately five months and that they were improperly served pursuant to CPLR 308(2) and CPLR 310-a. The affidavit of service reflects that defendants Stavis and Stavis Kornfeld were served on August 4, 2005, by delivering the summons and verified complaint to 820 Second Avenue, New York, NY, their former office address, and by mailing a copy of those pleadings to the same address on August 5, 2004. According to the affidavit of service, the pleadings were left with defendant Stavis Kornfeld's managing agent, Christine Doe. Plaintiffs obtained defendants' address through the New York State Department of State, Division of Corporations. Defendants Stavis and Stavis Kornfeld submitted evidence to show that their office had moved to a different location and did not maintain any personnel or agents at that location at the time service was attempted.
Service of process upon a limited liability partnership (hereinafter "LLP") is governed by CPLR 310-a ( see Lamba v. Lasala, NYLJ, Oct. 19, 2001, p2, col 2 [Sup Ct NY Co]). Pursuant to CPLR 310-a, service shall be made by "delivering a copy personally to any managing agent or general partner of the limited partnership in this state, to any other agent or employee of the limited partnership authorized by appointment to receive service or to any other person designated by the limited partnership to receive process, in the manner provided by law for service of summons, as if such person was the defendant" (CPLR 310-a). Deliver-and-mail service upon individuals, as alleged to have been used to serve defendant Stavis, is governed by CPLR 308(2). The deliver-and-mail method requires delivering the summons to a person of suitable age and discretion at the actual place of business, dwelling place or ususal place of abode of the person to be served and by mailing a copy of the summons to the person to be served (CPLR 308).
Defendant Stavis Kornfeld, an LLP, argues that plaintiff served the summons upon a person not authorized to accept service for the LLP and at a place which was not its actual place of business. Defendant Stavis similarly argues that the summons were not properly served because it was served at a place which was not his actual place of business. Plaintiffs, on the other hand, argue that service was proper because they relied upon the representation of the person served that she was the managing agent of the LLP and authorized to accept service and because they relied upon the address listed with the Division of Corporations as plaintiff's place of business.
When there is a question as to whether service of process was proper, the plaintiff has the burden of showing compliance with statutory requirements ( 72A Realty Assocs. v. New York Environ. Control Bd, 275 AD2d 284, 713 NYS2d 26 [1st Dept 2000]; Wern v. D'Alessandro, 219 AD2d 646, 631 NYS2d 425 [2nd Dept 1995]). The filing of a proper affidavit of a process server is ordinarily sufficient to support a finding of jurisdiction ( Jannace v. Nelson, L.P., 256 AD2d 385, 681 NYS2d 591 [2nd Dept 1998], citing Skyline Agency v. Ambrose Cappotelli, Inc., 117 AD2d 135, 502 NYS2d 479 [2nd Dept 1986]). However, where "there is a sworn denial of service by the defendant, the affidavit of service is rebutted and the plaintiff must establish jurisdiction by a preponderance of the evidence at a hearing" ( Id. ; see also, Frankel v. Schilling, 149 AD2d 657, 540 NYS2d 469 [2nd Dept 1989]). In view of defendants' argument that service was improper because it was not made as required under the CPLR, a hearing is necessary to determine whether service was proper upon defendants Stavis and Kornfeld and Roger Stavis.
In their sur-reply, plaintiffs request leave to amend their complaint pursuant to CPLR 3025(b). This request is not properly before the court since plaintiffs have failed to properly move for leave to amend their complaint.