Opinion
Index No. 150283/2023 Motion Seq. No. 001
12-14-2023
WARSHAW BURSTEIN, LLP, Plaintiff, v. COLAMBDA TECHNOLOGIES, INC., Defendant.
Unpublished Opinion
PART 38M
MOTION DATE 06/05/2023
DECISION + ORDER ON MOTION
Louis L. Nock, Judge
The following e-filed documents, listed by NYSCEF document numbers (Motion 001) 10, 11, 12, 13, 14, 15, 16, 17, 18, 19,20,21,22,23,24,25,26,27, and 28 were read on this motion to DISMISS.
Upon the foregoing documents, the motion to dismiss defendant's counterclaims is granted in part, to the extent set forth below, for the reasons set forth in the moving and reply papers (NYSCEF Doc. Nos. 11, 19, 28) and the exhibits attached thereto, in which the court concurs, as summarized herein.
Plaintiff law firm commenced this action seeking unpaid legal fees from its former client, defendant. Defendant brings six counterclaims, for breach of contract, legal malpractice, breach of fiduciary duty, violation of Judiciary Law § 487, fraud, and breach of the covenant of good faith and fair dealing. In summary, defendant alleges that it retained plaintiff to obtain approval for a reverse merger and ticker symbol change from the Financial Industry Regulatory Authority ("FINRA"). Plaintiff ultimately failed to gamer FINRA approval. Defendant alleges that plaintiff advised it to undertake costly and unnecessary state level merger filings, failed to detect flaws in the underlying merger documents and disclosures that precluded FINRA approval, communicated with and employed a disbarred attorney in its representation of defendant, and disclosed privileged information regarding defendant to defendant's business rivals. Plaintiff now moves to dismiss all six counterclaims.
"On a motion to dismiss pursuant to CPLR 3211, the pleading is to be afforded a liberal construction" (Leon v Martinez, 84 N.Y.2d 83, 87 [1994]). "[The court] accept[s] the facts as alleged in the complaint as true, accord[ing] plaintiff the benefit of every possible favorable inference, and determin[ing] only whether the facts as alleged fit within any cognizable legal theory" (id. at 87-88). Ambiguous allegations must be resolved in plaintiff s favor (JF Capital Advisors, LLC v Lightstone Group, LLC, 25 N.Y.3d 759, 764 [2015]). "The motion must be denied if from the pleadings' four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law" (577 West 232nd Owners Corp, v Jennifer Realty Co., 98 N.Y.2d 144, 152 [2002] [internal citations omitted]). "[W]here ... the allegations consist of bare legal conclusions, as well as factual claims either inherently incredible or flatly contradicted by documentary evidence, they are not entitled to such consideration" (Ullmann v Norma Kamali, Inc., 207 A.D.2d 691, 692 [1st Dept 1994]).
Plaintiff is entitled to dismissal of the first counterclaim for breach of contract. Both the legal malpractice claim and the breach of contract claim arise out of the same facts and seek the same damages (Voutsas v Hochberg, 103 A.D.3d 445, 446 [1st Dept 2013]), and defendant cannot allege that plaintiff promised any particular result (Senise v Mackasek, 227 A.D.2d 184, 185 [1st Dept 1996]). Indeed, the retainer agreement contains a provision in which defendant expressly acknowledged "that [plaintiff] in no way predicted the outcome or result of [defendant's] matter" and "that no promises have been made to [defendant] by [plaintiff] other than that [plaintiff] will use its best reasonable professional effort on behalf of [defendant]" (retainer agreement, NYSCEF Doc. No. 14, § 9[b-c]).
Turning to the malpractice claim, "[a]n action for legal malpractice requires proof of three elements: (1) that the attorney was negligent; (2) that such negligence was a proximate cause of plaintiffs losses; and (3) proof of actual damages" (Global Bus. Inst, v Rivkin Radler LLP, 101 A.D.3d 651 [1st Dept 2012]). Defendant adequately alleges several discrete acts of malpractice, specifically, that plaintiff failed to adequately examine the underlying merger documents and disclosures, failed to correct errors in those documents, and advised defendant to undertake costly and unnecessary work to effectuate the merger at the state level that plaintiff should have known was unnecessary in light of the unamended disclosures. Further, defendant states that because of plaintiff s conduct, FINRA never approved the merger and defendant incurred additional unnecessary costs. At the motion to dismiss stage, these allegations are sufficient to sustain the counterclaim.
The counterclaim for breach of fiduciary duty is also adequately pled. "To establish a prima facie case for breach of fiduciary duty, a plaintiff must allege (1) the existence of a fiduciary relationship, (2) misconduct by the defendant, and (3) damages directly caused by the defendant's misconduct" (Village of Kiryas Joel v County of Orange, 144 A.D.3d 895, 898 [2d Dept 2016] [internal quotation marks and citations omitted]). While plaintiff correctly points out that there is a certain amount of overlap between this counterclaim and the legal malpractice counterclaim, the breach of fiduciary duty allegations primarily concern other conduct by plaintiff allegedly violative of the Rules of Professional Conduct; specifically, that plaintiff utilized a disbarred attorney as part of its work on defendant's matter without telling defendant, and requiring defendant to pay fees for said disbarred attorney. In addition, plaintiff allegedly disclosed its invoices detailing work done for defendant to a third party. Plaintiff argues that the counterclaim should be dismissed in its entirety as duplicative, but misstates the specific allegations underlying each counterclaim. Thus, to the extent that the breach of fiduciary duty counterclaim is supported by independent allegations of misconduct, the court declines to dismiss it as duplicative.
The counterclaim for violation of Judiciary Law § 487 must be dismissed. Violations of the statute are only actionable if they take place during a pending judicial proceeding (US Suite LLC v Baratta, Baratta & Aidala LLP, 171 A.D.3d 551, 551 [1st Dept 2019]). Defendant does not allege any such proceeding. Moreover, none of the conduct defendants complain of took place within the State of New York, and the statute has no extraterritorial reach (Doscher v Manatt, 148 A.D.3d 523, 524 [1st Dept 2017] ["courts have held that the statute does not apply to conduct outside New York's territorial borders or to administrative proceedings, observing that its purpose is to regulate the manner in which litigation is conducted before the courts of this State"]).
The fraud and breach of the duty of good faith and fair dealing counterclaims arise out of the same facts and seek the same damages as the legal malpractice and breach of fiduciary duty counterclaims, and must therefore be dismissed as duplicative (e.g. Ullmann-Schneider v Lacher &Lovell-Taylor, P.C., 121 A.D.3d 415, 416 [1st Dept 2014]; Soni v Pryor, 102 A.D.3d 856, 858 [2d Dept 2013]). In addition, the court notes that to the extent the fraud counterclaim alleges that plaintiff misrepresented its own qualifications, defendant fails to sufficiently allege misrepresentations of present fact (see Fairway Prime Estate Mgt., LLC v First Am. Intern. Bank, 99 A.D.3d 554, 557 [1st Dept 2012] ["if the promise concerned the performance of the contract itself, the fraud claim is subject to dismissal as duplicative of the claim for breach of contract"]; HSH Nordbank AG v UBS AG, 95 A.D.3d 185, 206 [1st Dept 2012] [dismissing fraud claim based in part on alleged insincere promise regarding the manner of performance). Finally, defendant fails to plead with particularity any misrepresentation made by plaintiff, as defendant does not allege what was said, when it was said, and who it was said to (El Entertainment U.S. LP v. Real Talk Entertainment, Inc., 85 A.D.3d 561, 562 [1st Dept 2011]).
Accordingly, it is hereby
ORDERED that the motion to dismiss is granted and the first and fourth through sixth counterclaims are dismissed; and it is further
ORDERED that plaintiff is directed to serve a reply to the counterclaims within 20 days after service of a copy of this order with notice of entry; and it is further
ORDERED that counsel are directed to appear for a preliminary conference in Room 1166, 111 Centre Street, New York, New York, on January 17, 2024, at 2:15 PM.
This constitutes the decision and order of the court.