Opinion
150178/10
09-13-2011
Norman M. Sheresky, Plaintiff, v. Sheresky Aronson Mayefsky & Sloan, LLP, A PARTNERSHIP IN DISSOLUTION, ARONSON MAYEFSKY & SLOAN, LLP, DAVID ARONSON, ALLAN E. MAYEFSKY and PAMELA M. SLOAN, Defendants.
Counsel on the matter were Arther J. Ciampi and Maria L. Ciampi of Ciampi LLC, Steven A. Berger, Esq. of Berger & Webb LLP and Thomas P. Puccio of Law Offices of Thomas P. Puccio for the Plaintiff and Bruce E. Fader of Proskauer Rose LLP for Defendants.
Counsel on the matter were Arther J. Ciampi and Maria L. Ciampi of Ciampi LLC, Steven A. Berger, Esq. of Berger & Webb LLP and Thomas P. Puccio of Law Offices of Thomas P. Puccio for the Plaintiff and Bruce E. Fader of Proskauer Rose LLP for Defendants.
, J.
Motion sequence numbers 002 and 003 are consolidated for disposition.
In motion sequence number 002, defendants move, pursuant to CPLR 3211 (a) (1), (5) and (7), and CPLR 3016 (b) to dismiss the amended complaint in its entirety.
In motion sequence number 003, plaintiff Norman M. Sheresky ("Sheresky") moves, pursuant to CPLR 2104, for an order directing defendants to comply with their alleged prior agreements and practices to pay Sheresky his 1/4 share, in the amount of approximately $200,000, of the accounts receivable collected by the defendant law firm Sheresky Aronson Mayefsky & Sloan, LLP for work performed prior to August 1, 2010.
MOTION SEQUENCE NUMBER 002
This action involves a dispute between the members of the former matrimonial law firm of Sheresky Aronson Mayefsky & Sloan, LLP ("SAMS") concerning Sheresky's alleged ouster from SAMS, the remaining members' alleged breach of fiduciary duties to Sheresky, and the firm's alleged oral promise in 1998 to pay for a whole life insurance policy for Sheresky with a death benefit of $1,000,000.00 (the "life insurance policy") and an alleged 2007 oral promise to pay off the $1,100,000.00 mortgage (the "mortgage") on his newly purchased co-op apartment.
Background
It is undisputed that, in 1995, Sheresky founded a law firm with defendants David Aronson ("Aronson") and Allan Mayefsky ("Mayefsky") and with non-party Lisa Roday ("Roday"). Approximately one year later, Roday left the law firm. In or about 2007 defendant Pamela Sloan ("Sloan") became a partner in the firm.
Sheresky alleges that he was the mainstay of the firm. He asserts that, in 1998, "to induce him to continue his disproportionate contribution to the firm," the law firm (at that time composed of Sheresky, Aronson and Mayefsky) agreed to pay for the life insurance policy. He states that the firm continued to pay the premiums until March 2010. Amended Complaint ¶ 39.
In 2007, the lease on the law firm's office space expired and the firm decided to move to more expensive space. At approximately the same time, Aronson and Mayefsky allegedly suggested that the firm add Sloan as a fourth equity partner. Sheresky alleges that in return for his agreement to personally guarantee the lease for the new office space and the line of credit SAMS obtained from Sterling National Bank, and to accept Sloan as a partner, the individual defendants and SAMS agreed that the law firm would pay off the $1,100,000.00 mortgage on Sheresky's newly purchased coop apartment and pay for Sheresky's life insurance policy. In furtherance of that alleged agreement, SAMS annually paid Sheresky an additional $100,000.00, in monthly payments of $8333, which, he contends, was the amount of his mortgage payments and the payment of any applicable taxes thereon.
At some point after the firm moved to its new offices, Sheresky told his partners that he wished to have less involvement in the "day to day minutiae of practicing law," but that he wanted to continue being involved in unusual cases. He also hoped to still attract business to the firm. Amended Complaint ¶ 56. According to Sheresky, in 2009, the annual end-of-year meeting was uncharacteristically formal and there was an unusual air of hostility. Sheresky states that, although the firm had been profitable during the prior year, Mayefsky, the managing partner, announced that distributions of profits would be less than in prior years. Sheresky further alleges that when the distributions were made, Aronson, Mayefsky and Sloan received extra bonuses, and he did not. Sheresky alleges that the atmosphere in the office had become progressively more hostile even before the December 2009 meeting.
Sheresky states that, due to the changes in the firm, he decided "to slowly' retire over a period of years." Amended Complaint ¶ 64. In response, Aronson and Mayefsky sent a memorandum to Sheresky with a proposed agreement, which Sheresky found inadequate. That proposed agreement characterized the past $100,000.00 yearly payments as "buyout payments" that would cease after 10 years. Aronson and Mayefsky notified Sherefsky that if he did not accept their proposal, they would stop making payments on his life insurance policy and mortgage. When Sherefsky rejected the proposal, the firm stopped making those payments.
Sheresky alleges that over the next few months, defendants threatened to dissolve SAMS in order to coerce him into retirement and pay him a fraction of what he deserved in light of his value to the firm. Sheresky further alleges that defendants held meetings and took actions important to the law firm without informing him, including, but not limited to firing his secretary of 35 years and informing contract partners and employees not to work with him. Finally on July 30, 2010, Aronson, Mayefsky and Sloan formed a new law firm, defendant Aronson Mayefsky & Sloan, LLP (AMS).
Sheresky further alleges that, on or before August 3, 2010, defendants informed Sterling National Bank that they intended to dissolve SAMS. The bank, therefore, accelerated the line of credit in the amount of $719,000.00, which was then paid by SAMS from its operating account without Sheresky's knowledge or consent. Sheresky contends that payment of the credit line was unnecessary, removed available cash, may have resulted in a prepayment penalty and enabled AMS to obtain financing that would not have been available if the SAMS line of credit had remained in place. On August 4, 2010, defendants allegedly cancelled Sheresky's health and dental insurance. Defendants informed Sheresky that SAMS was dissolved on August 6, on AMS stationery. Defendants then removed Sheresky's name from the reception area, put up an AMS sign, and took various other actions, which Sheresky alleges were all to his detriment.
In contrast, according to defendant Mayefsky, SAMS's managing partner, the dispute between defendants and Sheresky "erupted" when Mayefsky and Aronson made several specific proposals to Sheresky on March 26, 2010 "regarding his announced wish to retire." Affidavit of Allan E. Mayefsky in Support of Motion to Dismiss Amended Complaint, May 9, 2011 ("Mayefsky 5/9/11 Aff."), ¶ 3. In the memo, Mayefsky and Aronson indicated that they would be making a proposal for the dissolution of SAMS by the end of April, and asked who, if anyone, would be representing him. They then proposed:
As part of any dissolution process, we will be seeking to recover from you the amounts ($8,333 each month) paid to you since November 2007 as "buyout" amounts, unless you agree to the buyout, which we had thought, until your recent correspondence, you had agreed to, i.e., in return for $100,000/yr for ten years, you would be relinquishing any claim to firm assets, including amounts receivable/WIP, and were agreeing to the continued use by SAMS of your name. The amounts paid toward that buy-out currently exceed $200,000 and we reserve all rights with respect to that buy-out agreement, which has already been partially performed by us.
Affirmation of Bruce E. Fader in Support of Motion to Dismiss Amended Complaint ("Fader Support Affirm."), Ex. K, at 1. The memo further indicated that until the firm dissolves "the firm will no longer be paying life insurance premiums for the partners." Id.
Mayefsky further states that there was no oral promise to pay Sheresky's mortgage and that he made the monthly mortgage payments himself. Mayefsky 5/9/11 Aff., at ¶¶ 8, 9.
According to Mayefsky, on the basis of the communications between their counsel and counsel for Sheresky, they twice postponed the date for dissolution of the law firm, and participated in mediation in early August. Mayefsky 5/9/11 Aff., ¶ 4; Fader Support Affirm., Exs. E, I. By means of a July 22, 2010 letter from their counsel, defendants also proposed sending a neutral letter to clients inviting them to join either the new law firm, Sheresky, or any other counsel of their choice. Mayefsky 5/9/11 Aff., ¶ 6; Fader Support Affirm., Ex. H.
Mayefsky states that Sheresky did not respond to their proposal and no such letter was sent pre-dissolution, and on August 3, 2010, Aronson sent a memo to Sheresky again indicating that there was a need to inform SAMS's clients about the dissolution of the law firm, and asking whether Sheresky preferred to notify his clients or whether he wanted the firm to contact them. Mayefsky 5/9/11 Aff., ¶ 7; Fader Support Affirm., Ex. L.
Mayefsky further alleges that on the dissolution of SAMS, the Sterling National Bank ("Sterling") loan became due. Mayefsky 5/9/11 Aff., ¶ 10; Fader Support Affirm., Ex. M. Mayefsky also states that Sterling sent SAMS a notice calling the loan, that there was no prepayment penalty and that AMS did not obtain a line of credit with Sterling. Mayefsky 5/9/11 Aff., ¶¶ 10-12.
In response, Sheresky claims that although from those documents it appears that defendants were cooperative and pleasant to him, in other e-mails defendants were not. Sheresky has not submitted these emails.
The amended complaint asserts five causes of action: 1) breach of fiduciary duty against the individual defendants; 2) constructive trust against all defendants; 3) unfinished business against the individual defendants and AMS; 4) breach of contract against the individual defendants and SAMS; and 5) promissory estoppel against the individual defendants and SAMS.
Defendants move to dismiss the amended complaint pursuant to CPLR 3211 (a) (1), (5) and (7), and CPLR 3016 (b).
I.FIRST CAUSE OF ACTION: BREACH OF FIDUCIARY DUTY
(Against the Individual Defendants)
Defendants contend that plaintiff's cause of action for breach of fiduciary duty fails to meet the specificity requirements of CPLR 3016. Defendants assert that plaintiff has put forth only general allegations in the amended complaint. They contend that plaintiff has only vaguely stated that defendants conducted secret meetings with key employees of SAMS and among SAMS partners concerning his removal, and merely asserted information and belief allegations that defendants informed clients that Sheresky was unable to adequately represent their interests.
In addition to those general allegations, however, the amended complaint also contains specific allegations. The complaint alleges that at the year-end meeting, Mayefsky announced that distributions would be less than in the previous year, though there might be a supplemental distribution in 2010, if profits continued. Plaintiff complaint that, without his knowledge or consent, defendants distributed extra bonuses to themselves and not to him. This allegation meets the specificity requirements of CPLR 3016.
Defendants next contend that the basis of Sheresky's claim is the allegation that the defendants conspired to oust Sheresky from the law firm and keep the cases he originated for themselves. Defendants argue that contemporaneous correspondence disprove plaintiff's allegations. Defendants further contend that, even assuming plaintiff's allegations were true, they fail to state a cause of action for brief of fiduciary duty. As defendants argue, "[n]o one can be forced to continue as a partner against his will." Seligson v. Russo, 16 AD3d 253, 253 (1st Dep't 2005) (internal quotations and citation omitted). Moreover, partners may discuss among themselves a move to another firm. Gibbs v. Breed, Abbott & Morgan, 271 AD2d 180, 185 (1st Dep't 2000). Thus, the allegations that defendants threatened to dissolve SAMS and notified the Sterling Bank that the firm was planning to dissolve do not state a claim for breach of fiduciary duty.
However, "[t]he members of a partnership owe each other a duty of loyalty and good faith, and [a]s a fiduciary, a partner must consider his or her partners' welfare, and refrain from acting for purely private gain.'" Id. at 184 (citation omitted). In light of plaintiff's allegations that the defendants paid themselves bonuses that were not paid to Sheresky, defendants' motion to dismiss the cause of action for breach of fiduciary duty is denied.
II.SECOND CAUSE OF ACTION: CONSTRUCTIVE TRUST
(All Defendants)
Sheresky alleges that defendants breached express promises to share profits from lawsuits with him; conspired to finance AMS by stealing SAMS's business and using SAMS's funds, including cash used to pay SAMS's line of credit; and took all steps to make it impossible for Sheresky to stay in business. Sheresky seeks to impose a constructive trust on the profits earned by AMS concerning such matters.
"The elements necessary for the imposition of a constructive trust are a confidential or fiduciary relationship, a promise, a transfer in reliance thereon, and unjust enrichment." Abacus Fed. Sav. Bank v. Lim, 75 AD3d 472, 473 (1st Dep't 2010).
The only promise Sheresky mentions in this cause of action is the alleged promise to share profits from lawsuits that Sheresky claims he transferred to SAMS. His other allegations are merely duplicate his cause of action for breach of fiduciary duty.
Even assuming that Sheresky could prove his allegation regarding the oral promise, he has not alleged that defendants would be unable to pay him the share of profits to which he claims to be entitled. Thus, the equitable remedy of a constructive trust is inappropriate. Defendants' motion to dismiss the second cause of action is granted. Evans v. Winston & Strawn, 303 AD2d 331, 333 (1st Dep't 2003).
III.THIRD CAUSE OF ACTION: UNFINISHED BUSINESS
(Against the Individual Defendants)
Defendants move to dismiss plaintiff's third cause of action for "unfinished business." Defendants argue that, under New York Law, when a partnership dissolves, causes of action for unfinished business are limited to cases involving contingency fees. Defendants contend that because SAMS practiced matrimonial litigation, its cases were not contingency fee based and therefore a cause of action for unfinished business is not available. Sheresky, citing In re Coudert Bros. LLP Law Firm Adversary Proceedings (447 B.R. 706 [S.D.NY 2011]), contends that recent cases contradict defendants' characterization of New York law.
The U.S. District Court in Coudert Brothers left undisturbed the Bankruptcy Court's decision denying a motion to dismiss a cause of action for unfinished business involving hourly fees paid to a law firm for work performed post-dissolution on former law firm matters. In doing so, however, the District Court recognized that the question of whether the unfinished business doctrine applies to hourly fee matters has not been decided by New York courts. The District Court therefore looked to cases decided by federal courts in other jurisdictions in reaching its decision. See e.g. Robinson v. Nussbaum, 11 F. Supp. 2d 1 (D.D.C. 1997); In re Brobeck, Phleger & Harrison LLP, 408 B.R. 318 (Bankr. Ct., N.D. Cal. 2009); reconsideration granted in part 2010 WL 377679, 2010 Bankr. LEXIS 307 (Bankr. Ct., N.D. Cal. 2010).
New York court decisions dealing with a cause of action for unfinished business have uniformly involved contingency fee cases. See, e.g,. McDonald v. Fenzel, 233 AD2d 219 (1st Dep't 1996); Shandell v. Katz, 217 AD2d 472 (1st Dep't 1995); Kirsch v. Leventhal, 181 AD2d 222 (3d Dep't 1992). It is logical to distinguish between contingency fee arrangements and cases which are billed on the basis of hourly work. A fee collected in a contingency fee case initiated by the former law firm may well result in a fee much greater than the amount of work expended by the lawyer or lawyers handling the case. In contrast, to the extent that compensation for the case is based solely on the amount of hourly work performed post-dissolution, compensating a former partner out of that fee would reduce the compensation of the attorneys performing the work. Furthermore, New York State's disciplinary rules specifically state that lawyers shall not divide fees for legal services with another lawyer who is not associated with the firm unless
(1) the division is in proportion to the services performed by each lawyer or, by a writing given to the client, each lawyer assumes joint responsibility for the representation; (2) the client agrees to employment of the other lawyer after a full disclosure that a division of fees will be made, including the share each lawyer will receive, and the client's agreement is confirmed in writing; and (3) the total fee is not excessive.22 NYCRR 1200.0, DR 1.5 (g). The Disciplinary Rule goes on to provide, however, that payment to a lawyer formerly associated with a law firm is not prohibited pursuant to a separation or retirement agreement (DR 1.5 [h]), however, no such agreement existed here.
Similarly, the partnership could have had a partnership agreement which established principles to be applied in case of the partnership's dissolution; it did not.
This being said, the court is not inclined to recognize a cause of action for unfinished business for hourly fee cases which has, hitherto, not been recognized by the New York courts. Defendants' motion to dismiss the third cause of action is, therefore, granted.
IV.FOURTH CAUSE OF ACTION: BREACH OF CONTRACT
(Against Individual Defendants and SAMS)
Sheresky alleges that defendants made two promises to him that were breached. He asserts that, in 1998, in order to induce him to continue his disproportionate contribution to the firm, the partnership agreed to pay the premiums on his $1,000,000 life insurance policy. Amended Complaint § 39. Sheresky also alleges, without specifying when the alleged promise was made, that the defendants assured him that they would continue to pay his life insurance premiums "until he died or it was fully funded." Amended Complaint ¶ 52. The firm paid premiums for the insurance policy from 1998 until March 2010.
With respect to the second alleged promise, according to Sheresky, in 2007, when the apartment Sheresky and his wife lived in was about to come out of rent stabilization he suggested that the law firm purchase the apartment and lease it to him. Sheresky contends that, instead, the firm agreed that after he paid the down payment, it would "pay off a mortgage of $1,100,000.00." Amended Complaint ¶ 50. Sheresky contends that "in furtherance of its mortgage obligations to [him]," the law firm made annual payments of $100,000.00 to him to enable him to pay his mortgage and any applicable taxes thereon. Id. ¶ 53. Sheresky also alleges that both the promise to pay the mortgage and the promise to pay for the insurance policy were made in exchange for his agreement to personally guarantee the SAMS line of credit and the lease for the SAMS office, and to approve Sloan's entry into SAMS as a partner. Amended Complaint ¶ 108.
Sheresky contends that there were numerous writings confirming both promises and that payments were made in furtherance of those promises.
The Mortgage
Defendants do not dispute that, beginning in 2007, and for a period of three years, they paid Sheresky an additional $100,000 a year. However, defendants contend that they made no oral agreement to pay plaintiff's mortgage and that the payments to Sheresky were part of a "buy-out agreement," pursuant to which the firm would buy out his share of the partnership over a period of 10 years.
Defendants argue that the alleged oral agreement is barred under the statute of frauds, which requires an agreement to be in writing if, by its terms, the agreement is not to be performed within one year of the time it is made, or is not to be completed before the end of a lifetime. General Obligations Law § 5-701 (a) (1); see Sheehy v. Clifford Chance Rogers & Wells, LLP, 3 NY3d 554, 560 (2004) ("Because memories fail over time, the statute requires a written contract for an agreement that is not to be performed within one year of its making").
Sheresky contends that there are writings which satisfy the statute of frauds. One of those writings consists of the following handwritten notes on memo paper with the name Allen E. Mayefsky:
8,333
6,188 NMS
2,145 taxes
mortgage payment 6,187.50
Wells Fargo Bank, N.A.
P.O Box 17339
Baltimore, Md. 21297-1339
Amended Complaint, Ex. A.
According to Sheresky, these notations on Mayefsky's memo paper indicate that Mayefsky, as managing partner, agreed to pay for Sheresky's monthly mortgage payments of $6,187.50 and his tax payments of $2,145 and that the mortgage was held by the Wells Fargo Bank. However, the document is unsigned and does not refer to any specific agreement between SAMS and Sheresky.
Sheresky also relies on a copy of his Monthly Mortgage Statement, dated 12/02/10, which indicates that the total monthly payment due is $6187.50. That statement also notes the unpaid principal balance as $1,100,000 and the interest paid year-to-date as $68,082.50. This suggests at least, as defendants contend, that the mortgage is an interest-only mortgage. Sheresky further relies on a series of SAMS check stubs indicating monthly payments of $8,333 to Sheresky from October 31, 2007 to February 26, 2010. Finally, though not annexed to his amended complaint, the amended complaint alleges, on information and belief, that three annual tax returns submitted by SAMS to the federal and state governments list the various $8,333 payments as income to Sheresky. Those payments, and whether they were income to Sheresky, are not disputed. What is disputed is the purpose of the payments.
Sheresky argues that the writings can be "pieced together" to establish the oral agreement that the firm was to pay his mortgage and related taxes. See Matter of Wallabout Community Ass'n v. City of New York, 5 Misc 3d 1010(A), 2004 NY Slip Op 51310(U), *3 (Sup. Ct., NY County 2004).
Mayefsky contends that "[a]ll the note reflects is that Mr. Sheresky's monthly interest-only mortgage payment was $6,188, and the $2,145 difference between that number and the $8,333/month extra SAMS was distributing to him (as part of our buy-out agreement) could be used by him to pay his income taxes." Mayefsky Aff., ¶ 9. Mayefsky further states that SAMS never made Sheresky's mortgage payments, but rather, that Sheresky made them himself. Id. Mayefsky's statements appear to be confirmed by the copies of the monthly mortgage statement and check stubs annexed to the amended complaint.
Finally, defendants contend that the alleged promise to pay off Sheresky's mortgage is disproved by the Monthly Mortgage Statement annexed to the amended complaint. Defendants contend that the document appears to indicate that the mortgage is an interest only mortgage and, therefore, according to defendants could not ever be paid off.
The statute of frauds can be satisfied by a writing or writings which contains "substantially the whole agreement, and all its material terms" (Klein v. Jamor Purveyors, 108 AD2d 344, 347 [2d Dep't 1985) (citations and internal quotation marks omitted); the reader must be able to determine from those writings what the agreement is. Id. Here the documents on which Sheresky relies — the notes on Mayefsky's unsigned memo paper, the monthly mortgage statement, SAMS check stubs and three annual tax returns submitted by SAMS to the state and federal governments — fail to show the terms of the alleged agreement. In fact, given that the $8,333 monthly payments were obviously substantially in excess of Sheresky's monthly mortgage payments, the documents raise more questions than they answer. Thus, those documents do not satisfy the statute of frauds. Id.
Pointing to those repeated $8,333 monthly payments to him, Sheresky also seeks to rely on the doctrine of partial performance. Partial performance will only rescue an oral agreement from the requirements of the statute of frauds where that performance is " unequivocally referable'" to the oral agreement. Carey & Assoc. v. Ernst, 27 AD3d 261, 264 (1st Dep't 2006), quoting Anostario v. Vicinanzo, 59 NY2d 662, 664 (1983). Defendants contend that the $100,000.00 per year payments to Sheresky were in furtherance of an agreement to buy out his share of the partnership over a 10-year period. See Mayefsky Aff., § 9; see also Fader Affirm., Ex. K.
Multiple explanations exist for the payments that were made to Sheresky. Thus, the part performance exception to the statute of frauds is not satisfied. See Carey & Assoc. v. Ernst, 27 AD3d at 264.
The Insurance Policy
Although the amended complaint alleges that writings exist that confirm the alleged agreement to pay for his life insurance policy, Sheresky does not identify any such writings, nor does he even provide a copy of the policy itself.
Sheresky contends that the statute of frauds does not bar enforcement of the promise to pay the insurance premiums. He argues that, because he has alleged that the defendants promised to pay the premiums "until he died or it was fully funded" (Amended Complaint ¶ 52), the agreement could have been performed within one year and, thus, no writing is required. Citing Ohanian v. Avis Rent A Car Sys., Inc., 779 F.2d 101, 106 (2d Cir. 1985) (relied on by Sheresky for the proposition that the one-year provision in the statute of frauds has been read narrowly, and will not preclude an oral contract if there is the slightest possibility that it can be fully performed within one year).
As defendants note, however, Sheresky's original complaint alleges that, in 1998, the partnership agreed "to pay for a whole life insurance policy for Mr. Sheresky with a death benefit of $1,000,000.00," and that the firm paid the premiums from 1998 until March 2010. Complaint ¶ 27. The original complaint further alleges that, after moving their offices to 495 Lexington Avenue in 2007, the firm agreed to "continue to fund payment of his whole life insurance premiums until he died." Complaint ¶ 39. Sheresky made no allegation in the initial complaint that defendants agreed to pay for the policy "until it was fully funded." Amended Complaint ¶ 52.
Moreover, in his opposition to defendants' motion to dismiss the original complaint, Sheresky argues that his damages with respect to the insurance policy are that he will have to "pay the premiums himself (a loss he estimates at $50,000.00 to $100,000, ... annually over the next ten or more years.)." Plaintiff's Opp. Memo., at 9. Sheresky does not explain the basis for the change in allegations from the Complaint to the Amended Complaint. The change may be designed to circumvent the requirement of the statute of frauds that contracts that are not to be performed within one year must be in writing. General Obligations Law § 5-701 (a) (1). This unexplained and conclusory change in allegations concerning the nature of the promise is particularly troubling given that Sheresky would appear to allege two different promises to pay for his insurance premiums — the first, made in 1998 (when the payments began) with respect to which there is no suggestion that the promise was other than to pay premiums until his death, and a second alleged promise made in 2007.
Sheresky has not provided a copy of the Insurance Policy in order to show that it could, in fact, be fully paid within less than one year.
Sheresky's conclusory allegation is, thus, insufficient to establish that the alleged oral promise is not governed by the statute of frauds.
Sheresky has supplied no writing or writings to establish the terms of the agreement. He must therefore rely on the doctrine of partial payment. As defendants argue, however, the payments were not "unequivocally referable" to an alleged 2007 agreement to pay Sheresky's mortgage and insurance premiums. This is particularly evident as the premiums had been paid since 1998, long before the alleged 2007 promise was made, and could equally be attributed to the common policy of partnerships to pay life insurance policies for partners. See Fader Affirm., Ex. K, ¶ 5("Until we dissolve, the firm will no longer be paying life insurance premiums for the senior partners"). Thus, the partial payment exception to the statute of frauds is not satisfied.
In any case, defendants contend that if either part of alleged agreement is invalid under the statute of frauds, the entire agreement falls. See Dickenson v. Dickenson Agency, 127 AD2d 983, 984 (4th Dep't 1987). Sheresky argues, citing Apostolos v. R.D.T. Brokerage Corp. (159 AD2d 62, 65-66 [1st Dep't 1990]), that where the oral contract has two or more parts, they are severable. However, not all contracts with multiple parts are, indeed, severable.
Where the consideration for the separate promises can be apportioned without doing violence to the contract, the valid portion may survive. Dickenson v. Dickenson Agency, 127 AD2d at 984. Here, because Sheresky alleges the same consideration for both agreements (his willingness to personally guarantee the firm's line of credit and rent and his agreement to take on Sloan as a fourth partner), the two portions of the alleged oral agreement are not severable. Thus, even assuming that the alleged promise to pay for Sheresky's life insurance could be performed within one year, it is part of a larger alleged oral agreement which does not meet the requirements of the statute of frauds.
For these reasons, the fourth cause of action for breach of contracts is dismissed.
V.FIFTH CAUSE OF ACTION: PROMISSORY ESTOPPEL
(Against the Individual Defendants and SAMS, in the alternative)
Where a breach of contract claim fails because the underlying contract is rendered unenforceable by the statute of frauds, in order to sustain a claim for equitable estoppel a plaintiff must prove unconscionable injury. Foster v. Kovner, 44 AD3d 23, 29 (1st Dep't 2007) ("[A] claim of promissory estoppel will allow plaintiff to circumvent the statute of frauds if there is at least an allegation of infliction of unconscionable injury on plaintiff as a result of any reliance he placed on defendant's alleged promises.'"); Bellen v. Weiser, 2007 WL 2979827 *7; 2007 US Dist LEXIS 75673, *23 (S.D.NY 2007); Melwani v. Jain, 281 AD2d 276, 277 (1st Dep't 2001) (a cause of action for equitable estoppel may be dismissed where there is no allegation or proof of unconscionable injury as a result of reliance on the alleged promise). Here, although the amended complaint alleges that "injustice and inequity" will occur if the court fails to enforce the alleged oral promises (Amended Complaint ¶ 117), there is no specific allegation of unconscionable injury.
There is, of course, no simple definition of what constitutes an unconscionable injury. Citing a number of cases which hold that substantial expenditures of funds can constitute unconscionable injury, plaintiff's memorandum of law argues that Sheresky will be able to establish at trial that he has made major expenditures in reliance on defendants' alleged promises to pay his mortgage and insurance premiums. See, e.g., Trilogy Variety Stores, Ltd. v. City Prods. Corp., 523 F. Supp. 691 (S.D.NY 1981) (only on the inducement of renewing the their sublease did plaintiff make expenditures of $93,000); Sherpaco, LLC v. Kossi, 2010 WL 231618, 2010 NY Misc LEXIS 1322, 2010 NY Slip Op 30072(U) (Sup. Ct., NY County 2010) (allegation of contribution of $190,000 supports a counterclaim for partnership or other interest in property). Then, citing Buddman Distribs., Inc. v. Labatt Importers, Inc. (91 AD2d 838, 839 [4th Dep't 1982]), Sheresky argues that the question of whether circumstances are unconscionable should not be determined on the pleadings, but rather await a full determination at trial.
A motion to dismiss a cause of action for promissory estoppel is properly denied where plaintiff raises triable issues of fact about whether or not they have suffered unconscionable injury. See Ackerman v. Landes, 112 AD2d 1081, 1083 [2d Dep't 1985]). Where no such issues of fact are raised, however, the court can determine that unconscionable injury has not been alleged, and a cause of action for equitable estoppel may be dismissed. See American Bartenders School v. 105 Madison Co., 59 NY2d 716, 718 (1983) ("The circumstances set forth by plaintiff [defendant's refusal to execute lease modification] simply do not rise to a level of unconscionability warranting application of equitable estoppel"); Eber-NDC, LLC v. Star Indus., Inc., 13 Misc 3d 1222(A), *5, 2006 NY Slip Op 51948 (U) (Sup. Ct., Monroe Country 2006), aff'd as modified 42 AD3d 873 (4th Dep't 2007) (plaintiff raises "no issue of fact whether the circumstances are so egregious as to render unconscionable the assertion of the Statute of Frauds").
The amended complaint alleges that Sheresky relied on the alleged promises to his detriment by accepting the payments made for his insurance policy and mortgage, and by agreeing to be personally obligated concerning the office lease and the line of credit for SAMS, remaining a partner of SAMS, continuing to transfer cases to the individual defendants, agreeing to take Sloan in as a partner, and not arranging for alternative financing for the insurance policy and mortgage.
It is undisputed that the line of credit has now been terminated, and there is no allegation that Sheresky was held personally liable for the repayment of the line of credit. That promise thus does not constitute unconscionable injury. The office space is now occupied by the newly constituted partnership. While it is unclear under what name the space is now being leased or whether Sheresky's personal guarantee is still in force, the mere possibility of future liability under the personal guarantee constitutes neither a substantial expenditure of funds nor unconscionable injury.
In light of the amended complaint's allegations that at some time after the firm moved to new office space in 2007, Sheresky concluded that he no longer wanted to deal with the minutiae of practicing law, it is hard to see how his transfer of cases to his partners could constitute unconscionable injury. Nor has Sheresky alleged that taking Sloan into the partnership injured the firm or him as a partner in any way.
There is no allegation that Sheresky made any payments for his insurance premiums — those were made by the law firm — thus, they could not be a basis for a claim of unconscionable injury.
Thus the only remaining potential basis for a claim of unconscionable injury relates to the alleged promise to pay Sheresky's mortgage. Sheresky alleges that, because his apartment was leaving the protections of rent stabilization, he sought to have the law firm purchase his apartment and then lease it back to him. He alleges that when the firm was unwilling to be his landlord it agreed to pay for his mortgage after he paid the down payment. Although Sheresky's memorandum of law asserts that he can prove at trial that he made a "significant" down payment on his apartment, his amended complaint makes no allegation of the actual size of that down payment. The memorandum also asserts that relying on the law firm's alleged promise, he did not arrange for alternate financing for the mortgage.
According to Sheresky, from 2007 until March 2010 he was spared the expenditure of mortgage payments (defendants, of course, contend that although they did pay him an additional $100,000 per year during that period, they did not pay his mortgage). Furthermore, although as Sheresky asserts, he will now have to obtain other means of financing his mortgage payments, his decision to purchase the apartment was apparently spurred by the fact that the apartment was leaving rent stabilization. Had he not purchased the apartment, his rent would presumably have increased substantially. Thus, his need to obtain alternate financing for his mortgage does not constitute unconscionable injury.
Defendants' motion to dismiss the fifth cause of action is therefore granted.
MOTION SEQUENCE NUMBER 003
Sheresky seeks an order, pursuant to CPLR 2104, directing defendants to pay him approximately $200,000 in compliance with what he contends was an open court agreement to pay him his 1/4 share of accounts receivable collected by SAMS. Sheresky relies on a statement made in court on March 15, 2011 by Bruce E. Feder, counsel for defendants. Mr. Feder is stated to indicate that SAMS was in dissolution and that the old law firm ended on August 1, 2010, and that the receivables of the old firm have been collected and have been distributed equally to the old partners over the course of six or seven months. Sheresky further relies on the statement of his own counsel, Thomas Puccio, that he and Feder had agreed that Sheresky needed income and that they agreed that as receivables came in they would look at them and divide them. Sheresky then alleges that, as of April 27, 2011, there was over $800,000 on deposit in the SAMS account from collections from SAMS clients prior to August 1, 2010. Sheresky asserts, based upon the parties' open court agreement, that $200,000 should be distributed to him.
CPLR 2104 on which Sheresky relies states that:
An agreement between parties or their attorneys relating to any matter in an action, other than one made between counsel in open court, is not binding upon a party unless it is in a writing subscribed by him or his attorney or reduced to the form of an order and entered.Sheresky's alleged statements by counsel are far too nebulous to rise to the level of an open court agreement to distribute a specific amount of money in SAMS's account. See Curcio v. Watervliet City School Dist., 21 AD3d 666, 667 (3d Dep't 2005)(counsel's statement did not constitute a complete agreement with definite terms nor was it the product of mutual accord).
As the court indicated during oral argument on June 16, 2011, an accounting of the dissolved law firm is currently being conducted. When that is complete and both the assets and liabilities of SAMS are clear, further, if available funds remain, further distributions can be made. Therefore, plaintiff's motion, pursuant to CPLR 2104 is denied.
(Order on following page.)
ORDER
Accordingly, it is hereby
ORDERED that defendants' motion to dismiss the amended complaint in motion sequence number 002 is granted to the extent that the second through fifth causes of action are dismissed and it is otherwise denied; and it is further
ORDERED that defendants are directed to serve an answer to the complaint within 20 days of service of this order with notice of entry; and it is further
ORDERED that counsel are directed to appear for a status conference in Room442, 60 Centre Street, on October 25, 2011, at 11 a.m.; and it is further
ORDERED that plaintiff's motion in motion sequence number 003 seeking an order directing defendants to pay him $200,000 is denied.
Dated: New York, New York
September ____, 2011
ENTER:
Hon. Eileen Bransten, J.S.C.