Opinion
Index No. 655579/2021 Motion Seq. Nos. 004 005
03-13-2024
SERAFINI RELEASING LLC, Plaintiff, v. JOHNATHAN GRAY, GRAY KRAUSS STRATFORD SANDLER DES ROCHERS LLP Defendant.
Unpublished Opinion
MOTION DATE 03/01/2023, 03/01/2023
DECISION + ORDER ON MOTION
HON. MELISSA A. CRANE, JUDGE
The following e-filed documents, listed by NYSCEF document number (Motion 004) 95, 96, 97, 98, 99, 100, 101, 102, 103, 104, 105, 106, 107, 108, 109, 110, 111, 112, 113, 114, 115, 116, 117, 118, 119, 120, 121, 122, 123, 125, 127, 128, 129, 130, 131, 132, 133, 134, 135, 136, 137, 138, 139, 140, 141, 142, 143, 144, 145, 146, 147, 148, 149, 150, 151, 152, 153, 184, 187, 191, 192, 193, 194 were read on this motion to/for SUMMARY JUDGMENT (AFTER JOINDER)
The following e-filed documents, listed by NYSCEF document number (Motion 005) 74, 75, 76, 77, 78, 79, 80, 81, 82, 83, 84, 85, 86, 87, 88, 89, 90, 91, 92, 93, 94, 124, 126, 154, 155, 156, 157, 158, 159, 160, 161, 162, 163, 164, 165, 166, 167, 168, 169, 170, 171, 172, 173, 174, 175, 176, 177, 178, 179, 180, 181, 182, 183, 185, 186, 188, 189, 190, 195 were read on this motion to/for JUDGMENT - SUMMARY
In this action, plaintiff Serafini Releasing, LLC ("plaintiff' or "Serafini"), a New York based film production and distribution company, originally alleged that defendant Jonathan Gray ("Gray"), an attorney, and his law firm, defendant Gray Krauss Stratford Sandler Des Rochers, LLP ("Gray Krauss"), wrongfully stole its ownership interest in a film project entitled "16 Bars" (the "Film") and gave it to another party, Gary Gumowitz ("Gumowitz"). Susanne Bohnet ("Bohnet") is the chief operating officer and sole member of plaintiff. Plaintiff claimed that Gray was its attorney, that it relied on and trusted him, and was shocked to learn it "lost" its rights to the Film.
Plaintiffs theory of the case has been a moving target. During motion practice, plaintiff abandoned its ownership claim. Plaintiff now claims that Gray began prioritizing the interests of Gumowitz, the Film's investor and owner. Plaintiff claims Gray stripped plaintiff of the managerial rights that would have allowed it creative and managerial control over the completion and release of the Film. Plaintiff claims it had the right to complete the Film regardless of budget, and that Gumowitz and his company, 16 Bars Feature Film LLC, would be obligated to continue to finance the Film without limit or discretion until its completion.
The court consolidates Motion Sequence Nos. 004 and 005 for disposition. In Motion Sequence No. 004, plaintiff moves, pursuant to CPLR 3212, for summary judgment on all three causes of action in the amended complaint: (1) breach of fiduciary duty; (2) negligent advice causing damages; and (3) fraud. In Motion Sequence No. 005, defendants move, pursuant to CPLR 3212, for summary judgment dismissing the amended complaint. For the reasons set forth below, the court denies plaintiffs motion and grants defendants' motion.
FACTS
I. The Origin and Purchase of the Film 16 Bars
Plaintiff alleges that it began producing the Film for theatrical release in 2016. The Film was supposed to be a contemporary, Rap/Hip Hop driven action-drama depicting African American culture, and was also intended to be an important contribution to the Black Lives Matter movement (amended complaint [NYSCEF Doc No. 44], ¶ 7). Plaintiff further alleges that, during that pre-production period, it obtained the rights to the script and title of the Film (id., ¶8).
The screenplay upon which the Film is based (the "Screenplay") was written by Fredric S. Cohen a/k/a Rick Mordecon ("Mordecon"). On April 9, 2017, plaintiff entered into an Option Agreement with Mordecon (see NYSCEF Doc No. 77). The Option Agreement, that expired on April 9, 2018, gave Serafini the option to purchase the Screenplay (see id. at 1; see also Mordecon aff [NYSCEF Doc No. 85], ¶ 4). However, neither Serafini nor Bohnet, Serafini's managing member, purchased the Screenplay before the agreement expired. Thus, despite plaintiffs contentions the rights to the Screenplay remained with Mordecon (Mordecon aff, ¶ 4).
On June 4, 2018, 421 Pictures LLC (a company Gumowitz solely owned) and Mordecon entered into a Screenplay Purchase and Assignment Agreement (the Screenplay Purchase Agreement [NYSCEF Doc No. 86]) for the purchase of "16 Bars" (id., ¶ 5). Gumowitz, acting as the authorized signatory for 421 Pictures LLC, purchased the Screenplay for the price of $200,000 (see Screenplay Purchase Agreement, ¶ 3). As a result of this purchase, 421 Pictures LLC assumed sole ownership of the Screenplay. Neither Serafini nor Bohnet ever had any ownership rights to the Screenplay or the Film.
II. The First Engagement Agreement - Gray and Gray Krauss Are Retained as Production Counsel for the Film 16 Bars
Plaintiff alleges that, in November 2018, it approached Gray and his law firm, Gray Krauss, to act as production counsel for the Film (affidavit of Susanne Bohnet [NYSCEF Doc No. 97], ¶¶ 6-7; see also amended complaint, ¶ 6). According to plaintiff, because Serafini and Bohnet had no legal expertise, it specifically requested Gray's services to protect Serafini's legal interests in the project (Bohnet aff, ¶¶ 5-7). Those interests were allegedly "main producer and manager with discretion on all creative, editing and distribution matters" (NYSCEF Doc. No. 97, ¶ 11). Gray advised that he would form a separate limited liability company that would own the Film and through which Serafini could manage the Film as a co-manager and member of a "to be Formed Production LLC" (id., ¶ 16).
On November 27, 2018, Gray drafted and presented Serafini with an engagement agreement (the "Engagement Agreement" [NYSCEF Doc No. 87]). The Engagement Agreement states it is between "Serafini...on behalf of the production entity 16 Bars, LLC to be formed" (id.). Thus, Gray was to represent a to-be-formed LLC, that would own the Film. For a flat fee (the "Production Counsel Fee"), Gray would provide specific services on behalf of the to-be-formed LLC (see id.). The Engagement Agreement provided that Serafini was signing "on behalf of the production entity 16 Bars, LLC to be formed in connection with the Picture and its affiliated entities" (see id. at 1). Plaintiff alleges that the document makes Serafini, through the limited liability company that Serafini was going to control ("16 Bars, LLC"), Gray's client (Bohnet aff, ¶ 9). Defendants contend that neither Serafini nor Bohnet was ever defendants' client.
III. Gumowitz' Involvement
Plaintiff alleges that, in or around September 2018, Gumowitz approached it, and offered a verbal commitment to finance the Film (amended complaint, ¶ 17). Plaintiffs role was to be the Film's main producer and manager, with absolute discretion on all creative, editing, and distribution matters (id., ¶ 18).
Plaintiff further alleges that, shortly after the Engagement Agreement, in late 2018, plaintiff, Gray, and Gumowitz had a meeting in the conference room of Gray Krauss, during which Gray confirmed that plaintiff, through Bohnet, and Gumowitz would be co-managers and members of 16 Bars LLC, the yet to be formed production company (id., ¶ 23); see also Bohnet aff, ¶¶ 15-16).
Plaintiff alleges that, however, Gray had been in the process of launching his own production company, and that, after plaintiff, on behalf of 16 Bars, LLC engaged him, Gray undertook a relentless campaign to become involved in the production of the Film, or to use Gumowitz for his own projects (id., ¶¶ 23-25). According to plaintiff, Gray took several actions to further this campaign, including drafting documents (an operating agreement, a producer agreement, and a second engagement letter) that stripped plaintiff of its creative and business control over the Film. Instead, the documents provided total control to Gumowitz (id., ¶¶ 26-27).
IV. The Creation of the LLC & 16 Bars Production Services, Inc.
On December 10, 2018, a representative for Gumowitz, Ira Checkla of the Law Offices of John W. Hughes, filed paperwork with the New York State Division of Corporations and State Records to form 16 Bars Feature Film, LLC (the "LLC") (see NYSCEF Doc No. 88). The LLC was a single purpose entity Gumowitz formed to develop, produce, and exploit the Film.
On February 13, 2019, 421 Pictures, LLC and the LLC executed an Assignment and Assumption Agreement (the "Assignment") (see NYSCEF Doc No. 89). The Assignment granted the LLC all rights, title and interest to the Screenplay. Defendants drafted the Operating Agreement for the LLC on February 22, 2019 (see NYSCEF Doc No. 90). In an email dated February 21, 2019 to Gray, Bohnet acknowledged that the agreement provided that Gumowitz would be the sole owner/member of the LLC (NYSCEF Doc No. 79 ["so between Gary and the LLC, he owns the LLC"]).
16 Bars Production Services, Inc. (the "INC") was created on February 12, 2019 as a wholly owned subsidiary of the LLC to facilitate the handling of the New York State Film Tax Credit with respect to the Film (see Certificate of Incorporation [NYCEF Doc No. 91]). The incorporator was listed as Bohnet (see id.). The By-Laws of the INC listed Bohnet as an officer, with signing authority; and the LLC as the sole owner of the INC. The INC engaged plaintiff to provide the services of Bohnet with respect to certain duties on the Film pursuant to a separate Producer Agreement. Plaintiff was not an owner of the INC (see By-Laws [NYSCEF Doc No. 92]). Bohnet was not the only individual to have signatory rights. The line producer for the Film, Brian David Cange, also received signatory rights (see id.).
V. The Amended Engagement Agreement
On March 1, 2019, defendants issued the Amended and Restated Legal Engagement and Fee Agreement-16 Bars (the "Amended Engagement Agreement" [NYSCEF Doc No. 82]). The Amended Engagement Agreement explicitly stated that it superseded "the prior Engagement Agreement between Serafma Releasing LLC and the Firm". It again memorialized that defendants represented the LLC "as production counsel" in connection with the Film (Amended Engagement Agreement, at 1).
The Amended Engagement Agreement was not some "sneaky act" to replace plaintiff with Gumowitz as defendant's direct client (amended complaint, ¶¶ 52-53). As Bohnet admitted under oath, the Amended Engagement Agreement was "because the film entity [i.e., the LLC] was formed" (Bohnet dep [NYSCEF Doc No. 76], 168).
VI. The Producer Agreement
Plaintiff agreed that Gumowitz would be the sole owner of the Film (see 2/21/19 email), while Bohnet would be the producer of the Film in a written contract (the "Producer Agreement" [NYSCEF Doc No. 80]). The Producer Agreement states it is between the LLC and "Serafini f/s/o [for the services of] Susanne Bohnet (Producer)". Plaintiff alleges that it relied on defendants as its attorneys in executing the Producer Agreement (amended complaint, ¶ 50). However, the evidence contradicts this contention. For example, on April 26, 2019, defendants emailed plaintiff, attaching a draft of the Producer Agreement for review, and stating that plaintiff should review the agreement with her own attorney, as defendants did not represent her individually. The email also asked for any questions or comments plaintiff might have (see 4/26/19 email [NYSCEF Doc No. 83]). Moreover, Bohnet explicitly testified that Gray never stated that he was her attorney, and in fact stated in writing that he was not her attorney (Bohnet dep at 178-180). Further, in connection with the review of her Producer Agreement, plaintiff sought the advice of her own attorney, Ben Reder ("Reder") (see 5/24/19 email from plaintiff to Reder re review of Producer Agreement [NYSCEF Doc No. 84]).
VII. The Film Grew Significantly Over Budget, and Gumowitz Ceases Funding The Production
By Fall 2020, the Film production was a failure. The Film was significantly over budget. Gumowitz, as the owner of the Film, made the decision to cease further funding of the film, as it would have required hundreds of thousands of dollars to complete (Gumowitz dep, at 77-78; 117-118). As a result, Gumowitz lost millions of dollars of an investment he made in the Film. To date, the film is not complete.
VIII. The Amended Verified Complaint
On April 18, 2022, plaintiff tiled the amended complaint, alleging that defendants engaged in a campaign to strip plaintiff of its ownership rights in the Film, in their capacity as its attorney, because defendants allegedly wanted to gain control over, and an interest in, the Film. The amended complaint alleges causes of action for breach of fiduciary duty, negligent advice causing damage, and fraud.
DISCUSSION
"'[T]he proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact'" (Ayotte v Gervasio, 81 N.Y.2d 1062, 1063 [1993] [citation omitted]; Winegrad v New York Univ. Med. Ctr., 64 N.Y.2d 851, 853 [1985]). The burden is a heavy one: the facts must be viewed in the light most favorable to the non-moving party and every available inference must be drawn in the non-moving party's favor (Sherman v New York State Thruway Auth., 27 N.Y.3d 1019, 1021 [2016]). "Failure to make such showing requires denial of the motion, regardless of the sufficiency of the opposing papers" (Winegrad, 64 N.Y.2d at 853; see also Lesocovich v 180 Madison Ave. Corp., 81 N.Y.2d 982 [1993]).
The party opposing summary judgment has the burden of presenting evidentiary facts sufficient to raise triable issues of fact (Zuckerman v City of New York, 49 N.Y.2d 557, 562 [1980]; CitiFinancial Co. [DE] v McKinney, 27 A.D.3d 224, 226 [1st Dept 2006]). A court may grant summary judgment only when it is clear that no triable issues of fact exist (Alvarez v Prospect Hosp., 68 N.Y.2d 320, 324 [1986]), and "is inappropriate in any case where there are material issues of fact in dispute or where more than one conclusion may be drawn from the established facts" (Friends of Thayer Lake LLC v Brown, 27 N.Y.3d 1039, 1043 [2016]; see also Sillman v Twentieth Century-Fox Film Corp., 3 N.Y.2d 395, 404 [1957]; Tronlone v Lac d'Amiante Du Quebec, 297 A.D.2d 528, 528-529 [1st Dept 2002], affd 99 N.Y.2d 647 [2003]).
I. Breach of Fiduciary Duty and Negligence (First and Second Causes of Action)
In its first cause of action for breach of fiduciary duty, plaintiff alleges that "[i]n their role as attorneys retained by Plaintiff, Defendants assumed the role of fiduciary to Plaintiff and owed fiduciary duties to Plaintiff' (amended complaint, ¶ 88). Plaintiff further alleges that defendants breached those duties by "drafting and directing Plaintiff to execute legal documents that stripped Plaintiff of the rights and authority over its own Film" (id., ¶ 94).
In its second cause of action for "negligent advice causing damage," which sounds in legal malpractice, plaintiff alleges that, "[b]eginning in November 2018, Plaintiff consulted with Defendants Gray and Gray Krauss for the express purpose of engaging Defendant Gray to act as production counsel for the Film and protect Plaintiffs interests in connection with it." Plaintiff further alleges these services included "Gray providing Plaintiff direction and advice on numerous legal questions and matters related to the production of the Film and Plaintiffs control over it" (id., ¶ 102). Plaintiff further alleges that "[d]uring that time, however, Defendants exercised intentional and repeated lack of due care in advising Plaintiff," that included "advising Plaintiff to accept and/or sign documents that stripped it of its creative and business control over the Film" (id., ¶ 104).
A cause of action to recover damages for negligence sounding in legal malpractice has three elements: (1) that the defendant failed to exercise that degree of care, skill, and diligence commonly possessed and exercised by an ordinary member of the legal community, (2) that such negligence was the proximate cause of the actual damages plaintiff sustained, and (3) that, but for the defendant's negligence, the plaintiff would have been successful in the underlying action (Leder v Spiegel, 9 N.Y.3d 836, 837 [2007]; accord Century Prop. & Cas. Inc. Corp, v McManus & Richter,___ A.D.3d___, 2024 NY Slip Op 00799, * 5 [1st Dept 2024]). To succeed on a motion for summary judgment dismissing the complaint in a legal malpractice action, the defendant must present evidence in admissible form establishing that the plaintiff is unable to prove at least one essential element of his or her cause of action alleging malpractice (Schoenberg v Dankberg, 2020 NY Slip Op 33133[U] [Sup Ct, NY County 2020]).
To establish causation, a plaintiff must demonstrate that, but for the attorney's negligence, she would have prevailed in the underlying matter, or would not have sustained any ascertainable damages (Brooks v Lewin, 21 A.D.3d 731, 734 [1st Dept 2005]). The failure to establish proximate cause mandates the dismissal of a legal malpractice action, regardless of the attorney's negligence (id.-, see e.g. Jarmuth v Wagner, 219 A.D.3d 1248, 1249 [1st Dept 2023] [dismissing malpractice claim "because plaintiff did not, and cannot, adequately plead that this advice and conduct was the proximate cause of damage suffered by the co-op," as "(t)he complaint contains no nonconclusory allegations suggesting that the purported negligence by defendants was the 'but for' cause of the co-op sustaining actual damages"]). A plaintiffs speculation about loss resulting from an attorney's alleged omission is insufficient to sustain a case of legal malpractice (Dempster v Liotti, 86 A.D.3d 169, 177 [2nd Dept 2011]; see e.g. Weis v Rheem, Bell &Freeman, LLP, 217 A.D.3d 538, 539 [1st Dept 2023] ["Defendants were entitled to dismissal of the complaint given that plaintiffs failed to allege actual and ascertainable damages that were proximately caused by defendants' alleged malpractice" as "the allegations of proximate causation depend on multiple speculative allegations"]).;
To state a claim for breach of fiduciary duty, a plaintiff must allege the existence of a fiduciary relationship, misconduct by the other party, and damages directly caused by that party's misconduct (Castellotii v Free, 138 A.D.3d 198, 209 [1st Dept 2016]). "In the attorney liability context, the breach of fiduciary duty claim is governed by the same standard as a legal malpractice claim" (Knox v Aronson, Mayefsky & Sloan, LLP, 168 A.D.3d 70, 75-76 [1st Dept 2018], citing Weil, Gotshal & Manges, LLP v Fashion Boutique of Short Hills, Inc., 10 A.D.3d 267, 271-272 [1st Dept 2004]; accord Curtis v Berutti, 77 Misc.3d 327 [Sup Ct, Orange County 2022]). "Accordingly, to recover damages against an attorney arising out of the breach of the attorney's fiduciary duty, plaintiff must establish the 'but for' element of malpractice" (Knox, 168 A.D.3d at 76, citing Ulico Cas. Co. v Wilson, Elser, Moskowitz, Edelman & Dicker, 56 A.D.3d 1, 11 [1st Dept 2008]).
This court dismisses plaintiffs claims for breach of fiduciary duty and negligence because plaintiff cannot establish liability or damages sufficient to sustain these claims.
In its new theory of the case, plaintiff abandons its contention that it had ownership rights in the Screenplay and the Film, and now contends: (1) that it had the absolute right to complete and release the Film, regardless of budget, (2) that Gumowitz was obligated to continue to finance the Film without limit or discretion until its completion, and (3) that Gray robbed plaintiff of absolute power to complete and release the Film:
"For the sake of clarity, the managerial rights that are the subject in this Complaint would have allowed Serafini creative and managerial control over the completion and release of its own project"(plaintiffs' opposition memorandum of law [NYSCEF Doc No. 154], at 14]; see also plaintiffs memorandum of law in support of motion for summary judgment [NYSCEF Doc No. 96, at 5] [''As the producer of the Film, the most important thing to Serafini was control of the Film - not just creative control, but the ability to secure more financing, secure distribution, and ultimately see it released. Despite knowing that Serafini expected this control, Gray, the attorney Serafini had hired, cheated Serafini out of it"]; see id. at 24 [the Operating Agreement and the Producer Agreement "stripped Serafini of the right to manage the Company that owned its Film and, in effect, denied Serafini the right to control the release of its own project"]).
However, there is no evidence in the record to support that plaintiff was ever entitled to absolute rights to complete and release the Film, or that Gray, the LLC's production counsel for the Film, somehow how "robbed" plaintiff of these rights.
Meanwhile, Gumowitz, the uncontested owner of the Film, contradicts the claim that plaintiff had control over the production and release of the Film. He confirmed that, although Bohnet regularly made management decisions in connection with the Film, any decision that she made was always subject to his ultimate approval:
"Q: Would she [Bohnet] have management decisions?
A: Yes, but - and I made this very, very clear to her from the beginning because 1 had a - I was involved in another film that had a problem and I would not allow that to happen again, that I would be the final decision on everything and that's why I purchased the script and that's why I didn't want any additional people coming in funding the film. I would own the film exclusively and I made it very clear to her what my concerns were"(Gumowitz dep, at 36 [emphasis added]).
Further, plaintiff alleges that defendants advised Gumowitz to cease funding the Film's production (amended complaint, ¶ 85), that allegedly cost plaintiff years of work, interfered with the prospective distribution of the Film, and ultimately caused monetary damages to plaintiff in the realm of five million dollars (id., ¶¶ 84-86). However, the evidentiary record establishes that i the decision not to complete and release the Film was made solely by the Film's owner, Gumowitz. Gumowitz noted that the budget "kept expanding;" the Film "had to be reshot;" there was "no way to fix it." Moreover, the key reason that Gumowitz did not want the Film released was because he was worried that any release would have harmed the reputation of Vyce, the lead actor in the Film, and a recording artist under separate contract. Gumowitz testified:
"Q: Who made the decision not to put any more money into the film, was that yours, Docs, someone else's?
A: It was mine.
Q: What was the basis for your decision not to put any more money into the film?
A: The budget kept expanding on what it would cost to complete the film and there was no way to fix it. It just had to be reshot. It had to be somewhat of a
different film and just putting more money into it wouldn't have fixed the problems that, you know, it would effect Vice's [sic] career and that it would be an entertaining film for people to see. It didn't make sense to keep pouring money into it"(id. at 117-118). Accordingly, the record makes clear that that the decision not to complete and release the Film was in the sole discretion of Gumowitz, the owner of the Film, and not defendants. Plaintiff has provided nothing to contradict this reality.
Plaintiff also claims that, in an e-mail from Gray dated February 22, 2019, Bohnet was promised to be a "manager" in the draft Operating Agreement with "signing authority." Referencing the Operating Agreement, she contends that "the final version does not even mention her as a manager" (plaintiffs opposition memorandum, at 17). The email states as follows:
"Gary/Susanne- Attached please find the draft Operating Agreement for 16 Bars Feature Film, LLC. As advised by Susanne, I have provided for Gary to be the sole owner/member of the LLC; and for Gary and Susanne to be managers with the authority to sign documents on behalf of the LLC...
Gary - please make sure that you review the Operating Agreement with your personal legal and tax advisors, as there are obviously implications to being the owner of an LLC that will control the film, etc."(NYSCEF Doc No. 30).
Plaintiff claims this email alone shows that Gray took away plaintiffs power to complete and release the Film. However, the email merely states that the draft provided for Bohnet to be "a manager" with "signing authority." Such limited authority cannot be reasonably interpreted to provide Bohnet with the power to "complete and release" the Film. In addition, Gray provided the draft Operating Agreement for Gumowitz review, not for Bohnet to review. This was because Gumowitz is the sole owner of the LLC and sole signatory of the Operating Agreement.
Plaintiff also points to the Producer Agreement between the LLC and Serafini as an example of Gray allegedly stripping it of the power to complete and release the film, because it provided that Gumowitz "'shall be the individual with sole authority on behalf of [the Company] (including, without limitation, in connection with the exercise of any and all approval rights on behalf of [the Company] herein)'" (amended complaint, ¶ 45). Gray was the LLC's attorney and did not represent Serafini with respect to the Producer Agreement. Rather, Serafini actually had separate counsel review and provide comments on behalf of Serafini with regard to the Producer Agreement. The record reveals that Gray explicitly recommended that Serafini obtain independent counsel to review the Producer Agreement between the LLC and Serafini (for services of Bohnet):
"Susanne-
Please see draft Producer Agreement attached for your review. Please review with your attorney (as you know, we do not represent you, individually) and provide any questions/comments"(see 4/26/19 email).
Plaintiff then had its attorney, Ben Reder, a Los Angeles based entertainment lawyer, review the Producer Agreement "f/s/o Susanne". On May 4, 2019, Bohnet wrote to Gray and acknowledged both that Gray was "production counsel" for the Film and that Reder represented plaintiff:
1"Ben Reader in LA who reps me on a bigger film, which has now great movement too, looking over my producer deal and was very excited to hear that you are our production counsel and told me that the agreement is a very fair agreement"(see 5/4/19 email [NYSCEF Doc No. 137]).
Accordingly, plaintiff has failed to put forth any evidentiary proof to support its claims of that it had the power to complete and release the Film, regardless of Gumowitz' objections, or that Gray robbed plaintiff of these rights. Therefore, plaintiff did not suffer damages from being precluded from creative control over the Film, and its completion and distribution. Plaintiff never had the right to do so. As such, defendants are entitled to summary judgment dismissing the first and second causes of action for breach of fiduciary duty and negligence.
a. Fiduciary Duty I
The causes of action for breach of fiduciary duty and negligence/attorney malpractice must also be dismissed on the separate ground that plaintiff fails to show that defendants owed her a fiduciary duty, because plaintiff was never defendants' client.
Throughout the amended complaint, plaintiff alleges that defendants, in their role as attorneys plaintiff retained, assumed the role of a fiduciary and therefore owed fiduciary duties to plaintiff (amended complaint, ¶ 88). Plaintiff further alleges that defendants' representation of plaintiff began when plaintiff signed the Engagement Agreement (id., ¶¶ 91-94). Finally, plaintiff claims that defendants had personal and professional interests in the Film that they did not disclose to plaintiff, and took several actions contrary to plaintiffs interests, thereby stripping it of its rights and authority over its own Film (id., ¶ 94).
"[A] fiduciary relationship arises between two persons when one of them is under a duty to act for or give advice for the benefit of another upon matters within the scope of the relation" (Oddo Asset Mgt. v Barclays Bank PLC, 19 N.Y.3d 584, 592-594 [2012] [citation and quotation marks omitted]; accord Adam Leitman Bailey, P.C. v Pollack, 63 Misc.3d 1229[A], 2019 NY Slip Op 50793[U], * 7 [Sup Ct, NY County 2019]). Under New York law, a corporation's attorney represents the corporate entity, not its shareholders or employees (Eurycleia Partners, LP v Seward & Kissel, LLP, 12 N.Y.3d 553, 561-562 [2009]).
First, the Engagement Agreement and the Amended Engagement Agreement establish that plaintiff was not defendants' client. Generally, where parties have entered into an agreement, courts look to the express terms of the agreement to discover the nexus of the parties' i relationship and the particular contractual expression (EBC I, Inc. v Goldman, Sachs &Co., 5 N.Y.3d 11, 19-20 [2005]). Plaintiffs claim of a fiduciary relationship fails as a matter of law based on the plain language of the Engagement Agreement and the Amended Engagement Agreement, both of which clearly state that defendants were engaged to act as production counsel in connection with the Film (see NYSCEF Doc Nos. 83, 87).
In addition, the Engagement Agreement specifically states that Serafini was signing "on behalf of the production entity 16 Bars, LLC to be formed in connection with the Picture and its affiliated entities," and not on behalf of itself (Engagement Agreement, at 1 [emphasis added]). The Amended Engagement Agreement likewise states that it is between 16 Bars, LLC and defendants, not between Serafini and defendants:
"This letter shall constitute the amended and restated written engagement agreement between 16 Bars Feature Film, LLC ... and Gray Krauss Sandler Desk Rochers LLP...in connection with the Picture ... and shall supersede in all respects the prior Engagement Agreement between Serafini Releasing LLC and the Firm, dated as of November 27, 2018. Client hereby retains the Firm to advise Client, to prepare certain documents, and to act as production counsel in connection with the motion picture being produced by the Client, presently entitled'16 Bars'";(Amended Engagement Agreement, at 1).
Both Gray and Gumowitz testified as to the need for two agreements. First, Gray testified that:
"Q: Is this the second agreement that we referenced earlier when discussing the first one from 2018?
A: Correct. From the first conversation with Susanne, it was discussed that there would be a follow-up engagement letter, once the entity was formed. And this is, in fact, that agreement"(Gray dep, at 185-186).
Gumowitz similarly testified that:
"Q: Was it your understanding that once the LLC was formed a second agreement would be entered into with the law firm-
A: Yes.
Q: - is that agreement?;
A: Yes"(Gumowitz dep, at 120).
Further, Bohnet's own testimony establishes that her understanding was that Gray was the attorney for the LLC:
"Q: Do you think Jonathan was the attorney for the film, for Serafini or for Susanne Bohnet personally?
A: Jonathan was the attorney to Serafini and subsequently the film. Serafini retained Jonathan's law firm"(Bohnet dep, at 68). Bohnet also admitted that her only basis for the claim was her own individual "understanding" that because her name was on the document that she was the client:
"Q: Do you have a retainer agreement or any other writing that supports that conclusion that you were individually represented?
A: Okay. In my retainer agreement, I signed with my name as "Serafini Releasing" and I believe its standard when a person signs as a producer who has a company that such a producer is represented individually as a producer by the same attorney as well.
Q: Okay. So it's just your understanding. You do not have an agreement that says specifically, "Susanne Bohnet, individually"; is that correct?
A: Yes, but I never had an agreement that says "Susanne Bohnet individually"(id. at 70:3-23).
Bohnet also admits that she knew there was always going to be a second Engagement Agreement after the film entity was formed. This also undermines the claim that plaintiff was the client:
"Q: Was it your understanding at the time of this agreement, March 1, 2019, that this agreement was going to supersede the first engagement agreement?
A: Yes.
Q: Why was the second agreement entered into?
A: Because the film entity was formed"(id. at 167-169).
Further, despite plaintiff claiming that it paid Jonathan Gray's firm an initial payment in the amount of $10,000 as the initial Production Counsel Fee payment, at her deposition, when shown the actual $10,000 check, Bohnet admitted that it was 16 Bars Feature Film LLC and not plaintiff who made the payment (id. at 137-138; 217). i
Although plaintiff also argues the language of the Engagement Agreement, as well as the conversations between Gray and Bohnet, confirm that Gray and the Firm held themselves out to be plaintiffs counsel (opposition memorandum at 7; see also plaintiffs memorandum in support at 15), the record contradicts this argument. On November 27, 2018, Bohnet wrote an instructional e-mail to Gray's office (NYSCEF Doc No. 138), in which she advised that the First Engagement Agreement would be superseded by a second agreement, and that the second agreement "will be with 16 Bars LLC" (the entity to be formed to produce and own the Film). This e-mail makes clear that the existence of the Engagement Agreement and the Amended and Restated Engagement Agreement was not a case of Gray "changing clients," but rather, was Gray following plaintiffs instructions:
"Michael, please send us the engagement agreement today, with Serafini Releasing, the second engagement will be with 16 Bars LLC. We have to start with the director and Line Producer agreements"(id.).
Moreover, it is clear from Bohnet's deposition testimony that plaintiff knew from the very beginning the reason for the second agreement was that the LLC would then be formed:
"Q: Why was the second agreement entered into?
A: Because the film entity was formed"(id. at 168).
Bohnet also testified that defendants were attorneys for the LLC, not plaintiff:
"Q: But you acknowledge he was counsel to the film; right?
A: Yes"(id. at 120).
The Producer Agreement further establishes that plaintiff was not defendants' client, because other counsel represented it in connection with the agreement. In the April 26, 2019 email previously referenced, defendants emailed plaintiff, attaching a draft of the Producer Agreement, and highlighting the fact that Bohnet should review the agreement with her attorney, as defendants did not represent her. Plaintiff then engaged Reder. ।
Moreover, despite plaintiff's allegation that it relied on defendants as its fiduciary and attorney in executing the Producer Agreement (amended complaint, ¶ 50), Bohnet's own deposition testimony refutes this, as she acknowledges that Gray never stated that he was her attorney:
"Q: So you're saying Jonathan said in this phone call on or about April 26th that he was your attorney?
A: Jonathan did not say he was my attorney. Jonathan explained to me that he would want another attorney to look it over and I asked Jonathan why and Jonathan said to me that it might be a good idea to have another fresh eyes or that he just wants to give me the option to have somebody look it over.
Q: But you said a moment ago you said to Jonathan, 'Why would somebody else have to read it if you are my attorney?'; correct? You said that to him.
A: But - yeah, but -
Q: Yes?
A: You just said to me Jonathan said on the phone call he is my attorney. That's not what Jonathan said. Jonathan offered me, on this phone call, that I could have looked-that I would have the agreement looked over by somebody, which was very strange to me"(Bohnet dep, at 178-179).
In the face of the evidence to the contrary, plaintiff now contends that Serafini and Bohnet are not the same, that Gray only told Bohnet to get counsel, and that thus, Reder represented Bohnet only and not Serafini. The facts completely contradict this contention. First, Serafini is the party to the Producer Agreement, not Bohnet. Second, Bohnet admits she is the Chief Operating Officer and sole member of Serafini Releasing LLC (see Bohnet aff, ¶ 1). Indeed, if Bohnet is really distinct from Serafini, then the February 22, 2019 email from Gray stating that Bohnet would be a "manager" in the Operating Agreement would not be actionable by Serafini at all. Finally, the Producer Agreement literally states "Serafini [for the services of| Susanne Bohnet".
In any event, the record reveals that: (1) Reder reviewed the agreement on behalf of Serafini; (2) Reder provided comments on behalf of Serafini; and (3) Reder was designated in the Producer Agreement as counsel to receive notices on behalf of Serafini. Because Reder provided comments to the Producer Agreement, Reder could not have represented Bohnet alone, without also representing plaintiff.
Accordingly, the record reveals that plaintiff cannot claim to have justifiably relied on its belief that defendants were its attorneys when Bohnefs own testimony and the relevant agreements negate the claim. Thus, plaintiff s causes of action for breach of fiduciary duty and negligence are devoid of any facts to support an attorney/client relationship between the parties. Accordingly, there was no fiduciary relationship between plaintiff and defendants. Thus, defendants have established, prima facie, that plaintiff s claims for breach of fiduciary duty and negligence must be dismissed on this ground as well.
II. Fraud (Third Cause of Action)
In its third cause of action for fraud, plaintiff alleges that defendants affirmatively misrepresented the terms of the Operating Agreement when they told plaintiff in the February 22, 2019 email that the agreement named plaintiff or its manager as member and co-manager of the Company (amended complaint, ¶ 110; see also plaintiffs memorandum in support, at 25). Specifically, plaintiff alleges that, "[b]y assuring Serafini (and Bohnet) that Bohnet, on Serafini's behalf, was a manager of the Company, [Gray] induced Serafini to move forward," but "Bohnet was not a manager, and Gray failed to correct that misrepresentation until it was too late" (plaintiff s memorandum, at 25). Plaintiff further alleges that "[i]n relying on Gray, Bohnet and Serafini then proceeded, believing Serafini's control of the project and end product was assured," but, however, "[i]t was not... which caused damages in the manners described above" (id).
In an action to recover damages for fraud, the plaintiff must prove a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury (Lama Holding Co. v. Smith Barney, 88 N.Y.2d 413, 421 [1996]; accord Board of Mgrs. Of the Soundings Condominium v Foerster, 138 A.D.3d 160, 162 [1st Dept 2016]).
Here, the evidentiary record shows that defendants did not misrepresent the terms of the Operating Agreement. The February 22, 2019 e-mail from Gray to both Bohnet and Gumowitz does not state that plaintiff was to be given creative control of the Film, or the ability to make sure that it was finished. Instead, Gray merely provided a draft Operating Agreement at the request of his client - the LLC - for review, and confirmed the information Bohnet provided that: 1) Gumowitz would be the sole owner/member of the LLC, 2) Bohnet and Gumowitz would be managers with signing authority, and 3) Gumowitz, as owner of the LLC, will control the Film ["As advised by Susanne, I have provided for Gary to be the sole owner/member of the LLC; and for Gary and Susanne to be managers with the authority to sign documents on behalf of the LLC" (see 2/22/19 email). The draft Operating Agreement plainly stated "Gary to be the sole owner/member of the LLC; and for Gumowitz and Bohnet to be managers with the authority to sign documents on behalf of the LLC." Thus, there was no misrepresentation of terms. Nor would it be reasonable for plaintiff to believe otherwise.
Indeed, the evidentiary record reveals that Serafini/Bohnet received exactly what was promised - signing power for the Film. In fact, Bohnet signed virtually every agreement in connection with the Film, on behalf of the LLC and the INC (see spreadsheet outlining a list of certain agreements Bohnet signed on behalf of the Film [NYSCEF Doc No. 144]). Accordingly, there was no actionable misrepresentation.
Moreover, plaintiffs claim for fraud is untenable because it cannot establish any actionable damages. In a fraud action, a plaintiff may recover only the actual pecuniary loss sustained as a direct result of the wrong (Continental Cas. Co. v PricewaterhouseCoopers, LLP, 15 N.Y.3d 264, 271 [2010]), "or what is known as the 'out-of-pocket' rule" (Lama Holding Co., 88 N.Y.2d at 421). "Under this rule, the actual loss sustained as a direct result of fraud that induces an investment is the 'difference between the value of the bargain which a plaintiff was induced by fraud to make and the amount or value of the consideration exacted as the price of the bargain'" (Continental Cas. Co., 15 N.Y.3d at 271, quoting Sager v Friedman, 270 NY 472, 481 [1936]). "The damages are to compensate plaintiffs for what they lost because of the fraud, not for what they might have gained," absent the fraud (id.-, see also Lama Holding Co., 88 N.Y.2d at 421 ["Under the out-of-pocket rule, there can be no recovery of profits which would have been realized in the absence of fraud"]).
Here, however, the evidentiary records demonstrates that plaintiffs alleged damages are only based on alleged projected estimates of what the Film would have earned had it been released, not any actual out-of-pocket damages. Plaintiff admits that these damages are projections, allegedly based on test screenings and third parties' willingness to extend offers for completion and distribution expenses (see Plaintiffs Response to Defendant's First Set of Interrogatories [NYSCEF Doc No. 93]). In fact, the only known "offer" from a third-party for the Film was a distribution service GVN offered, that did not include an offer to finish the film, but only to provide distribution services (see Gray dep, at 222). Gumowitz would still have been responsible to fund the completion of the Film. Further, as previously outlined, plaintiff did not have creative control of the Film, or the ability to ensure that it was finished and released. Therefore, plaintiff incurred no losses as a result from the failure to complete the Film.
Accordingly, defendants are entitled to summary judgment dismissing the third cause of action for fraud.
The court has considered the remaining arguments, and finds them to be without merit.
Accordingly, it is
ORDERED that defendants' motion for summary judgment (motion sequence no. 005) is granted, and the amended complaint is dismissed with costs and disbursements to defendants as taxed by the Clerk upon the submission of an appropriate bill of costs; and it is further
ORDERED that plaintiffs motion for summary judgment on the amended complaint (motion sequence no. 004) is denied; and it is further
ORDERED that the Clerk is directed to enter judgment accordingly; and it is further
ORDERED that the Clerk is directed to mark this case as disposed.