Makhoul v. Watt, Tieder, Hoffar & Fitzgerald, LLP et al
Filing
124
ORDER granting 104 Motion for Summary Judgment: For the reasons discussed in the attached Memorandum and Order, Defendants' motion for summary judgment is granted in its entirety. The Clerk of the Court is respectfully directed to close this case. Ordered by Judge Pamela K. Chen on 9/2/2015. (Driscoll, Katherine)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
-----------------------------------------------------------------x
GEORGE MAKHOUL, Individually and as Successor
in Interest to M.E.S., INC.,
Plaintiff,
MEMORANDUM AND ORDER
11-CV-5108 (PKC)
-againstWATT, TIEDER, HOFFAR & FITZGERALD, LLP,
MARK SGARLATA, an individual, CHRISTOPHER
BRASCO, an individual, VIVIAN KATSANTONIS,
an individual, and CHRISTOPHER ANZIDEI, an
individual,
Defendants .
-----------------------------------------------------------------x
PAMELA K. CHEN, United States District Judge:
Plaintiffs George Makhoul, individually and in his capacity as successor-in-interest to
M.E.S., Inc. (collectively, “Plaintiffs”), bring suit against Watt, Tieder, Hoffar, & Fitzgerald,
LLP, and its individual partners (collectively, “WTH&F”). The complaint alleges that WTH&F
was jointly representing both its own client, Safeco Insurance Company of America, and
Plaintiffs in negotiations with the U.S. Army Corps of Engineers (“COE”) following MES’s
default terminations on three federally-funded projects bonded by Safeco. Premised upon the
alleged existence of an attorney-client relationship between Plaintiffs and Defendants, Plaintiffs
assert claims for legal malpractice, breach of fiduciary duty and a duty of care to Plaintiff,
tortious interference with contract, and unjust enrichment. For the reasons discussed herein,
Defendants’ motion for summary judgment is granted in its entirety.1
1
Given the Court’s finding that there was no attorney-client relationship between Plaintiffs and
WTH&F, as set forth infra, the Court declines to resolve the issue of Plaintiff Makhoul’s
standing to bring the claims in this action. See Defendants’ Memorandum of Law in Support of
Their Motion for Summary Judgment (“Def. Mem.”), dated 11/13/14, at 8–10. (Dkt. 106.)
BACKGROUND
A. Parties
M.E.S., Inc. (“MES”) is a New York corporation. (Def. 56.12 ¶ 1.) Makhoul claims he is
the president, sole officer and sole shareholder of MES. (Pl. Opp.3 at 3.) HMES is a New Jersey
partnership formed by MES and Hirani Engineering and Land Surveying, PC (“Hirani”). (Pl.
56.1(b) ¶ 2.) HMES was formed in 2003 for the sole purpose of bidding on the High Energy
Propellant Formulation Facility at Picatinny Arsenal contract (the “HEPFF Project”) with the
COE. (Id. ¶ 3.) Safeco Insurance Company of America (“Safeco”) is organized under the laws
of the State of Washington with its principal place of business, for purposes of the three COE
projects, in the State of New Jersey.4 WTH&F is a law firm, operating as a Virginia limited
liability partnership, with its principal place of business in Virginia. (Def. 56.1 ¶ 2.)
B. Relationship between Safeco and Makhoul
Makhoul personally executed two indemnity agreements in favor of Safeco on or about
February 3, 2002 and June 23, 2003 for the following three federally-funded projects bonded by
Safeco: (i) Contract No. W912DS-06-0023, awarded September 29, 2006, for a Pyrotechnics
Research and Technology Facility at Picatinny Arsenal in Dover, New Jersey between COE and
MES (the “Pyro Project”); (ii) Contract No. DACA5I-03-C-0024, awarded September 19, 2003,
for the HEPFF Project at Picatinny Arsenal in Dover, New Jersey between COE and HMES;
2
Citations to “Def. 56.1” refer to Defendants’ Statement of Material Facts pursuant to Local
Rule 56.1. (Dkt. 107.) Citations to “Pl. 56.1” refer to Plaintiffs’ Response to Defendants’ 56.1
Statement of Material Facts. (Dkt. 113.) Citations to “Pl. 56.1(b)” refer to Plaintiffs’ Statement
of Additional Facts. (Id.)
3
Citations to “Pl. Opp.” refer to Plaintiffs’ Opposition to Defendants’ Motion for Summary
Judgment, filed 1/16/15. (Dkt. 114.)
4
M.E.S., Inc. et al v. Liberty Mutual Surety Group et al., 10 Civ. 02798 (E.D.N.Y.) (PKC)
(VMS), at Dkt. 1, ¶ 7.
2
and, (iii) Contract No. W912DS-05-C-0006, awarded February 11, 2005, for an Explosive
Research and Development Loading Facility at Picatinny Arsenal in Dover, New Jersey between
COE and MES (the “ERDLF Project”). (Id. ¶ 3.) The two indemnity agreements contractually
obligated Plaintiffs to indemnify Safeco for any losses it incurred in fulfilling Plaintiff’s
obligations under the three projects. (Id. ¶ 7.)
Based on the COE’s determination that MES and HMES had defaulted in their
contractual obligations on each of the three projects, the COE issued formal cure notices to MES
and HMES, as well as Safeco, by letters dated March 5, 2008, November 4, 2008, and December
22, 2008. (Exs. 10–12, 13, 15, 16 to Def. Mem.) Following its issuance of the default notices,
the COE issued demands on Safeco to complete the projects pursuant to Safeco’s obligations
under the Performance and Payment Bonds, stating that “[t]he Government expects Safeco to
fulfill its obligations as surety in this case.” (Exs. 17–19 to Def. Mem.)
In or about March 20, 2008, Safeco hired WTH&F as outside counsel to advise and
represent Safeco in responding to the Bond Demand Letters on the Pyro, HEPFF and ERDLF
Projects. (Def. 56.1 ¶ 21.)
C. March 26, 2008 Meeting
Plaintiffs allege that on March 26, 2008, Safeco met with Plaintiffs and WTH&F to
“discuss the default, project status and a path forward.” (Pl. Opp. at 5.) Plaintiffs claim that
during this meeting, Defendants advised Makhoul that it could “simultaneously represent Safeco
and Plaintiffs in connection with the takeover and completion of the Pyro [P]roject and any
related negotiations with the COE.” (Id.) Plaintiffs argue that Defendant Mark Sgarlata, a
WTH&F attorney, assured Makhoul that it was “in his and MES’s best interest to work with
Safeco toward an amicable completion of the work.” (Id.) In contrast, WTH&F asserts that it
3
never made any representations to Plaintiffs, verbal or otherwise, that it would represent both
Plaintiffs and Safeco. (Def. Mem. at 10–11.) The parties agree that there is no written retainer
agreement, letter of engagement, or other document or written communication indicating that
Plaintiffs retained WTH&F as their counsel. (Pl. Opp at 11–12; Def. Mem. at 11–13.) However,
Plaintiffs claim that a verbal retainer was agreed to during the March 26, 2008 meeting. (Pl.
Opp. at 5.)
According to Plaintiffs, Defendants thereafter represented both Plaintiffs and Safeco in
connection with the Pyro Project takeover process. (Id.) Plaintiffs claim that between March 26,
2008 and January 2009, MES relied exclusively on Defendants for advice and representation in
all negotiations that MES had with the COE.5 (Id.) Plaintiffs allege that it had more than twelve
meetings with Defendants, without the presence of any other attorney representing Plaintiffs’
interests.
(Id. at 6.)
Plaintiffs state that as part of this representation, MES relied upon
Defendants for the preparation of written agreements with the COE, which Defendants
negotiated on behalf of both Safeco and MES. (Id. at 5.)
WTH&F claims that it attended meetings regarding the three COE projects on behalf of
Safeco only. (Def. 56.1 ¶ 23.)
D. Plaintiffs’ Legal Representation
Zawisny & Zawisny P.C. represented Plaintiffs for several years in connection with
reviewing and negotiating agreements between Plaintiffs and their subcontractors, reviewing
claim analyses, defending claims, reviewing important correspondence and mitigating disputes
between Plaintiffs and its subcontractors. (Pl. 56.1(b) ¶ 16.) In addition, Michael H. Payne and
5
Notably, although Plaintiffs’ complaint alleges malpractice by WTH&F between March 2008
and April 2009, during oral argument on Defendants’ motion, Plaintiffs shortened the period of
alleged representation to continuing only through January 2009.
4
Timothy Sullivan of Payne, Hackenbracht and Sullivan (“PHS”) provided legal assistance to
Plaintiffs with respect to their claims in connection with federal projects performed by Plaintiffs
for the COE, including Plaintiffs’ claims relating to the projects at issue in this litigation.6 (Id.
¶¶ 19, 21). Plaintiffs do not dispute that it was represented by several non-WTH&F attorneys on
various matters. (Pl. 56.1 ¶ 33.) However, Plaintiffs argue that these attorneys did not represent
them in their negotiations with the COE between March 2008 and January 2009. (Id.)
ANALYSIS
I.
Summary Judgement Standard
The standard for summary judgment is well-established. Summary judgment may be
granted only if the submissions of the parties taken together “show that there is no genuine issue
as to any material fact and that the moving party is entitled to judgment as a matter of law.”
FRCP 56(c); see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251–252 (1986). “The moving
party bears the burden of establishing the absence of any genuine issue of material fact,” Zalaski
v. City of Bridgeport Police Dep’t, 613 F.3d 336, 340 (2d Cir. 2010); see Salahuddin v. Goord,
467 F.3d 263, 272–73 (2d Cir. 2006), after which the burden shifts to the non-moving party to
“come forward with specific evidence demonstrating the existence of a genuine dispute of
material fact.” Brown v. Eli Lilly & Co., 654 F.3d 347, 358 (2d Cir. 2011); see also F.D.I.C. v.
Great American Ins. Co., 607 F.3d 288, 292 (2d Cir. 2010). A dispute of fact is “genuine” if
“the [record] evidence is such that a reasonable jury could return a verdict for the nonmoving
party.” Anderson, 477 U.S. at 248.
6
Sullivan, who was primarily responsible for attending to these claims, passed away in 2009,
and Payne assumed control of the prosecution of Plaintiffs’ claims. PHS thereafter merged with
Cohen, Seglias, Pallas, Greenhall and Furman (“Cohen Seglias”). (Pl. 56.1(b) ¶ 19). According
to Plaintiffs, Cohen Seglias continued to represent Plaintiffs on matters distinct and different
from those at issue in this case. (Id. ¶ 19.)
5
The non-moving party can only defeat summary judgment “by coming forward with
evidence that would be sufficient, if all reasonable inferences were drawn in [its] favor, to
establish the existence of” a factual question that must be resolved at trial. Spinelli v. City of
N.Y., 579 F.3d 160, 167 (2d Cir. 2009) (internal quotations and citations omitted); see also
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). “The mere existence of a scintilla of
evidence in support of the [non-movant’s] position will be insufficient; there must be evidence
on which the jury could reasonably find for the [non-movant].” Anderson, 477 U.S. at 247; see
also Lyons v. Lancer Ins. Co., 681 F.3d 50, 56–57 (2d Cir. 2012); Jeffreys v. City of N.Y., 426
F.3d 549, 554 (2d Cir. 2005). The non-moving party cannot avoid summary judgment simply by
relying “on conclusory allegations or unsubstantiated speculation,” Jeffreys, 426 F.3d at 554
(quotations and citations omitted); see also DeFabio v. East Hampton Union Free Sch. Dist., 623
F.3d 71, 81 (2d Cir. 2010); and must offer “some hard evidence showing that its version of the
events is not wholly fanciful.” Miner v. Clinton Cnty., 541 F.3d 464, 471 (2d Cir. 2008). In
determining whether a genuine issue of fact exists, the court must resolve all ambiguities and
draw all reasonable inferences against the moving party. Major League Baseball Props., Inc. v.
Salvino, Inc., 542 F.3d 290, 309 (2d Cir. 2008).
II.
Legal Malpractice Claim
In a diversity action based on attorney malpractice, state substantive law – here, that of
New York – applies. Rubens v. Mason, 527 F.3d 252, 254 (2d Cir. 2008). In order to sustain a
legal malpractice claim, a plaintiff must show: (1) the existence of an attorney-client
relationship; (2) negligence; (3) proximate cause; and (4) actual damages. M.J. Woods, Inc. v.
Conopco, Inc., 271 F. Supp. 2d 576, 583 (S.D.N.Y. Jul. 14, 2003).
6
Courts in this jurisdiction consider six factors to determine whether an attorney-client
relationship exists, though no one factor is dispositive:
1) whether a fee arrangement was entered into or a fee paid; 2) whether a written
contract or retainer agreement exists indicating that the attorney accepted
representation; 3) whether there was an informal relationship whereby the
attorney performed legal services gratuitously; 4) whether the attorney actually
represented the individual in one aspect of the matter (e.g., at a deposition); 5)
whether the attorney excluded the individual from some aspect of the litigation in
order to protect another (or a) client’s interest; 6) whether the purported client
believes that the attorney was representing him and whether this belief is
reasonable.
Merck Eprova AG v. ProThera, Inc., 670 F. Supp. 2d 201, 210 (S.D.N.Y. Sept. 17, 2009). Each
of the relevant factors is discussed below.7
1. There Is No Evidence of a Fee Arrangement
In this case, there is no evidence of a fee arrangement between Plaintiffs and WTH&F.
There are no documents reflecting any such arrangement, nor cancelled checks reflecting
payments to WTH&F from Plaintiffs. Indeed, it is undisputed that all of WTH&F’s bills were
sent to Safeco’s outside billing company and that Safeco paid all of WTH&F’s fees and invoices,
with no contribution from Plaintiffs. (Pl. 56.1 ¶¶ 28–29; Exs. 20, 24 to Def. Mem.)
In the face of this uncontroverted evidence, Plaintiffs argue that a fee arrangement
nonetheless existed between Plaintiffs and WTH&F by virtue of Plaintiffs’ obligation to
indemnify Safeco for any costs, such as legal fees, it incurred as a result of Plaintiffs’ default on
the COE contracts. (Pl. Opp. at 10.) However, Plaintiffs’ duty to reimburse Safeco for its legal
fees does not qualify as a fee arrangement between WTH&F and Plaintiffs, nor does it constitute
actual payment of WTH&F’s fees, for purposes of determining whether an attorney-client
7
Plaintiffs concede that the third factor is not applicable here. (Pl. Opp. at 10.)
7
relationship existed between Plaintiffs and WTH&F.
Plaintiffs cite no authority for this
contorted conclusion, nor has the Court found any.
2. There is No Evidence of Any Retainer or Contract with Plaintiffs
The parties agree that there is no written retainer agreement, letter of engagement, or
other document indicating that Plaintiffs retained WTH&F as their counsel. (Pl. 56.1 ¶ 26.)
However, Plaintiffs argue that a verbal retainer was reached during the March 26, 2008 meeting.
(Id.) Plaintiffs’ sole evidence to support this claim is Makhoul’s plainly self-serving affidavit8 in
which he asserts that, “[a]t that meeting on March 26, 2008, I was persuaded by Safeco and
WTH&F to allow WTH&F to represent MES’[s] interests against the COE in connection with all
negotiations for the Picatinny Projects.” (Makhoul Aff.9 ¶ 26.) However, it is well-settled that
one party’s unilateral, subjective belief that he was a client is not sufficient to establish an
attorney-client relationship. See Kubin v. Miller, 801 F.Supp. 1101, 1115 (S.D.N.Y. Jul. 31,
1992) (“[A]lthough the so-called client’s subjective belief can be considered by the court . . . this
8
While it is not the Court’s role to assess the credibility of parties or witnesses at the summary
judgment stage, see, e.g., McClellan v. Smith, 439 F.3d 137, 144 (2d Cir. 2006), “[w]hen
opposing parties tell two different stories, one of which is blatantly contradicted by the record, so
that no reasonable jury could believe it, a court should not adopt that version of the facts for
purposes of ruling on a motion for summary judgment.” Scott v. Harris, 550 U.S. 372, 380
(2007). Put differently, “where the plaintiff relies almost exclusively on his own testimony,
much of which is contradictory and incomplete, it will be impossible for a district court to
determine whether the jury could reasonably find for the plaintiff, and thus whether there are any
‘genuine’ issues of material fact, without making some assessment of the plaintiff’s account.”
Jeffreys, 426 F.3d at 554. Here, in addition to the evidence contradicting Makhoul’s affidavit,
the Court has other grounds for questioning the veracity of his statements based on evidence
adduced in connection with related litigation before the Court. See Safeco Insurance Company
of America v. M.E.S., Inc et al., 09 Civ. 03312 (E.D.N.Y.) (PKC) (VMS), at Dkt. 313, p. 17-18
(Magistrate Judge’s finding that Makhoul was not credible with respect to his denial of MES
having an interest in a company founded by Makhoul’s brother and Makhoul’s friend, to which
MES paid approximately $300,000 for a purported four-year lease soon after the Court imposed
monetary sanctions on MES).
9
Citations to “Makhoul Aff.” refer to the Affidavit of George Makhoul in Opposition to
Defendants’ Summary Judgment Motion, filed 1/16/15. (Dkt. 114–1.)
8
belief is not sufficient to establish an attorney-client relationship.”)); see Stratavest Ltd. v.
Rogers, 903 F.Supp. 663, 667 (S.D.N.Y. Nov. 16, 1995) (citing Kubin); Volpe v. Canfield, 654
N.Y.S.2d 160, 162 (2d Dep’t 1997) (“A plaintiff’s unilateral belief does not confer upon him the
status of client.”). This factor, therefore, provides little, if any, support for Plaintiffs’ position,
and is substantially outweighed by all of the other relevant factors.
3. There is No Evidence that WTH&F Actually Represented Plaintiffs In One
Aspect of the Matter
Plaintiffs concede that WTH&F “never formally appeared on behalf of Plaintiff[s] in any
litigation”, but nonetheless argue that they believed that WTH&F’s words and actions created an
attorney-client relationship. (Pl. Opp. at 13.) However, Plaintiffs fail to cite any pleading or
communication in which WTH&F held itself out as MES’s counsel. Rather, based largely on
Makhoul’s affidavit, Plaintiffs claim that: (1) they met with WTH&F on several occasions to
discuss a “multitude of issues regarding various defaults, project completion strategies, how to
respond to COE demands, as well as the terms and conditions of the MOU [Memorandum of
Understanding]” with the COE (id. at 14); (2) WTH&F attended meetings at which both Safeco
and MES were present and participated; and (3) Plaintiffs shared project documents with
WTH&F. (Makhoul Aff. ¶¶ 29–31, 34.) Even assuming the truth of these representations, the
Court does not find that they constitute evidence of actual representation of Plaintiffs by
WTH&F.
Mere participation in meetings with WTH&F and Safeco, and sharing project
documents with WTH&F – as Plaintiffs were required to do under the indemnity agreement – is
ambiguous conduct at best and, if anything, is more consistent with the contractual indemnitorindemnitee relationship that existed between Safeco and Plaintiffs than a purported, unmemorialized attorney-client relationship between Plaintiffs and WTH&F, who were clearly
retained by Safeco. This factor thus also weighs in favor of Defendants.
9
4. Plaintiffs Themselves Allege that WTH&F Excluded Plaintiffs from the
Negotiations with the COE in order to Protect Safeco
Although Plaintiffs contend that the fifth factor is not applicable, their complaint alleges
that WTH&F represented Safeco to MES’s exclusion in its dealings with the COE and that
WTH&F was loyal to Safeco, but not to Plaintiffs. (Def. Reply10 at 11; Compl. ¶¶ 29, 35–39.)
While Plaintiffs claim that this conduct is evidence of WTH&F’s breach of an attorney-client
relationship with Plaintiffs, it has obvious relevance in determining whether such a relationship
ever existed. Thus, based on Plaintiffs’ own allegations, the Court finds not only that the fifth
factor applies to this case, but that it weighs against a finding of an attorney-client relationship
between Plaintiffs and WTH&F.
5.
Plaintiffs Did Not Have a Reasonable Belief That They Were Represented by
WTH&F
Plaintiffs claim that they reasonably believed that they had an attorney-client relationship
with WTH&F between March 2008 and April 2009.11 (Compl. ¶¶ 20, 165.) The documentary
evidence, however, belies Plaintiffs’ claim that they held any such belief, whether reasonable or
not. Plaintiffs’ communications with their own attorneys contradict the claim that Plaintiffs
viewed WTH&F as their attorneys with respect to the COE projects.12
Furthermore, the
10
Citations to “Def. Reply” refer to Defendants’ Reply Memorandum of Law in Further Support
of Their Motion for Summary Judgment, dated 3/6/15. (Dkt. 109.)
11
As previously noted, although Plaintiffs originally alleged malpractice by WTH&F between
March 2008 and April 2009, during oral argument on Defendants’ motion, Plaintiffs shortened
the period of WTH&F’s alleged representation to January 2009.
12
Examples of communications between Plaintiffs and their own, separate legal counsel include:
(1) on 4/11/08, MES’s counsel, Timothy Sullivan, filed multiple appeals on MES’s claims
against COE (Ex. 37 to Def. Mem.); (2) on 6/11/08, MES provided Safeco with two complaints
filed against COE by Sullivan (Ex. 38 to Def. Mem.); (3) on 2/27/09, an email between MES,
10
correspondence between Safeco and Plaintiffs indicate that Safeco repeatedly advised MES that
Safeco was represented by WTH&F, and requested that Plaintiffs engage their own counsel
several times during the alleged period of joint representation.13 In fact, there is evidence that
Plaintiffs acknowledged that WTH&F represented Safeco, and not MES. For example, in a letter
Plaintiffs sent to Safeco on or about July 28, 2009, they stated: “Since March 2008, MES has
Sullivan, and the COE discussed recent settlement negotiations involving terminations and
claims on all three projects (Ex. 48 to Def. Mem.); (4) on 3/3/09, MES advised Safeco that its
counsel, Michael Payne, was continuing settlement negotiations involving terminations and
claims on all three projects (Ex. 49 to Def. Mem.); (5) Plaintiffs identified Payne as MES’s
attorney in two separate emails on 3/19/09 and 3/24/09 to Caryn Mohan-Maxfield, Esq./Safeco
(Ex. 50 to Def. Mem.); and (6) on 4/6/09, MES’s attorney, Mark Zawisny, filed another lawsuit
against Hirani and a subcontractor on the HEPFF Project, blaming them for MES’s failed
negotiations with the COE and the resulting default termination (Ex. 122 to Def. Mem.). While
Plaintiffs’ counsel sought, during oral argument, to mitigate the impact of these emails by
shortening the period of alleged representation to January 2009 and limiting the role of MES’s
counsel to matters separate from those handled by WTH&F, as discussed infra, there exist
numerous emails within this shortened time frame that directly contradict Plaintiffs’ purported
belief about having an attorney-client relationship with WTH&F during that period.
13
For example, (1) on 3/10/08 Safeco requested that Plaintiffs and their counsel, Timothy
Sullivan, meet with Safeco prior to Safeco’s meeting with the COE on the Pyro Project bond
demand (Ex. 33 to Def. Mem.); (2) on 4/14/08, Safeco sent an e-mail to arrange a meeting with
Plaintiffs and their counsel, Sullivan, to discuss WTH&F’s negotiations on Safeco’s behalf with
the COE regarding the surety takeover agreement on the Pyro Project (Ex. 51 to Def. Mem.); (3)
on 4/16/08, Safeco sent another email to Plaintiffs requesting that Plaintiffs forward an enclosed
letter to their attorney (Ex. 52 to Def. Mem.); (4) on 11/18/08 and 11/28/08, Plaintiffs sent two
letters to the COE requesting that the COE cure the alleged deficiencies on the ERDLF Project,
copying Sullivan on both letters (Exs. 46–47 to Def. Mem.); (5) on 12/15/08, Safeco emailed
Plaintiffs in regard to a meeting between the two parties, stating that “given the ‘global’ nature of
the discussion as described by you, and given the fact that Safeco will also be presented by Chris
Brasco, I again suggest that you have counsel present at the meeting[,]” to which Plaintiffs
responded, “MES will not have counsel present and recommended that Safeco does the same, but
do not object for Safeco to have its attorney present.” (Ex. 116 to Def. Mem.); and (6) on
2/19/09, an email from Safeco to Plaintiffs stated that, “Vivian Katsantonis and Chris Anzidei of
Watt Tieder (they are partners with Chris Brasco) can meet with you . . . .Safeco suggests that
M.E.S. have its legal counsel present at our meeting and in any subsequent dealings with the
DOL [Department of Labor]”, to which Plaintiffs replied, “As to meeting with Safeco’s counsel .
. . MES has never had its attorneys present or involved, and wanted to deal with Safeco and
Safeco only, but as a courtesy did not object for Safeco having its attorneys present. MES is not
interested in meeting with Safeco’s attorneys. . . .” (Ex. 120 to Def. Mem.).
11
repeatedly, verbally at meeting [sic] as well as in writing, informed [Safeco] and its consultants
(whether they are attorneys or not) that MES has not appointed any counsel to represent its
interests when it comes to its dealings with [Safeco].”14 (Ex. 126 to Def. Mem.) (emphasis
added). In addition, evidence that Safeco and Plaintiffs maintained an adversarial relationship
throughout this time period undermines Plaintiffs’ claim that they had a belief, no less a
reasonable one, that they were represented by WTH&F based on their joint interests with
Safeco.15
14
Other evidence indicating Plaintiffs’ knowledge that WTH&F represented Safeco and not
MES includes the following: (1) on 6/17/08, Plaintiffs emailed Safeco regarding a proposed
Subcontract Agreement, stating “I have not sent this proposed subcontract to Tim Sullivan
[Plaintiffs’ counsel] for his review yet. . . .” (Ex. 39 to Def. Mem.); (2) on 7/1/08 and 7/15/08,
Plaintiffs requested that Safeco forward him copies of all invoices that “Safeco received from
your consultants and attorneys,” and copies of “Safeco’s expenses and its consultants and
attorney’s invoices.” (Exs. 23, 53 to Def. Mem.); (3) Plaintiffs sent a letter to the COE on
10/22/08, stating that “[w]e understand from the Surety [Safeco] that their attorney has prepared
the Memorandum of Understanding agreed to at our 16 September 2008 meeting. . . .” (Ex. 87 to
Def. Mem.); and (4) on 1/8/09, Plaintiffs requested Safeco’s permission to contact Safeco’s
counsel “Christopher Brasco [WTH&F] for the expert witness recommendations for
Pyrotechnics. . . .” (Ex. 118 to Def. Mem.).
15
For example, (1) on 4/14/08, Plaintiffs emailed only Safeco its comments on the surety
takeover agreement, stating that “MES does not concur with Safeco’s decision to take over the
completion of the project,” and claimed that “it endangers other MES projects with the COE, and
impairs MES’[s] ability to negotiate and conduct its business without undue hardship.” (Ex. 65 to
Def. Mem.); (2) on 7/18/08, Plaintiffs sent a letter to Safeco, accusing it of “irresponsible
excessive spending” and that “MES is unable to accept Safeco’s latest demands,” and “despite
the objections of MES, Safeco agreed to take over the completion of the project” and “Safeco
also improperly ceded to the demands of the Government to exclude principal, MES, from any
and all discussions, negotiations, resolution of disputed issues, etc., exposing both MES and
Safeco to needless losses and additional risks. . . .” (Ex. 75 to Def. Mem.); (3) on 8/4/08,
Plaintiffs sent a letter to Safeco, accusing Safeco of “breaching and defaulting on its obligations
under the qualified [General Agreement of Indeminty “(GAI”)] when it decided to takeover [sic]
the completion of the project.” Plaintiffs argued that “Safeco did not act in good faith” but acted
in “bad faith” and “with intent to defraud MES.” In this letter, Plaintiffs copied their attorney,
Mark Zawisny, on the letter (Ex. 77 to Def. Mem.); (4) on 8/28/08, MES emailed Safeco, stating,
“Safeco is not authorized to discuss any matter concerning the HEPFF project with anyone
without the presence or written permission of MES since we do not want Safeco to undermine
MES’[s] rights or jeopardize MES’[s] position against Owner or any Subcontractor or others as
12
At oral argument, Plaintiffs attempted to salvage their claim about the existence of an
attorney-client relationship by: (1) redefining and shortening the period of representation to
conclude in January 2009 rather than April 2009 (as alleged in the complaint); and (2) arguing
that Plaintiffs had “drawn a line” between the lawyers they used solely for their dealings with
Safeco, e.g., Sullivan, Payne and Zawisny, and WTH&F, whom Plaintiffs allegedly retained for
the negotiations alongside Safeco with the COE. However, even this belated reconstruction is
belied by the previously discussed evidence. The sixth factor thus weighs decidedly against
finding an attorney-client relationship between Plaintiffs and WTH&F.
Based on its weighing of the relevant factors, the Court finds that Plaintiffs have failed to
adduce sufficient evidence demonstrating the existence of a genuine dispute of material fact
regarding the existence of an attorney-client relationship between Plaintiffs and WTH&F.
Accordingly, summary judgment is granted in Defendants’ favor on Plaintiffs’ legal malpractice
claim.
III.
Fiduciary Claims
Plaintiffs argue that even if its relationship with Defendants did not rise to the level of an
attorney-client relationship, Defendants still breached its fiduciary duty and duty of care to
Plaintiffs as non-clients in pursuing Safeco’s business. (Compl. ¶ 184.) Plaintiffs state that
Defendants were “at all times bound to exercise the utmost good faith and standard of care in
Safeco has done in the past.” (Ex. 82 to Def. Mem.); and (5) on 11/25/08, Plaintiffs sent Safeco
an adversarial letter regarding the ERDLF Project, stating, “MES is directing Safeco not to
attend the scheduled December 3, 2008 meeting between MES and the COE, since Safeco’s
attendance will only diminish MES’[s] bargaining position and provide the COE with unfair and
harmful leverage against MES. MES has informed Safeco time and time again of its disapproval
of the positions and actions that Safeco has taken on the Pyrotechnics and HEPFF Projects.” (Ex.
111 to Def. Mem.). Notably, all of these communications are within the shortened time frame of
alleged representation relied upon by Plaintiff at oral argument.
13
providing legal advice to a non-client in the course of interacting with [Plaintiff] in pursuing
Safeco’s business.” (Id. ¶ 178.)
“A fiduciary duty arises under New York law wherever ‘one person is under a duty to act
for or give advice for the benefit of another upon matters within the scope of the relation.’”
American Tissue, Inc. v. Donaldson, Lufkin & Jenrette Securities Corp., 351 F. Supp. 2d 79, 201
(S.D.N.Y. Aug. 10, 2004) (quoting Flickinger v. Harold Brown & Co., 947 F.2d 595, 599 (2d
Cir. 1991)). In order to establish a cause of action for breach of a fiduciary duty with respect to
the execution of the agreement, the plaintiff must establish: (1) the existence of a fiduciary
relationship; (2) misconduct by the defendant; and (3) damages that were directly caused by the
defendant’s misconduct. Johnson v. Nextel Commc’ns, Inc., 660 F.3d 131, 138 (2d Cir. 2011).
Under New York law, where a claim for breach of fiduciary duty is “‘premised on the
same facts and seeking the identical relief’ as a claim for legal malpractice, the claim for
fiduciary duty ‘is redundant and should be dismissed.’” Nordwind v. Rowland, 584 F.3d 420,
432-33 (2d Cir. 2009) (quoting Weil, Gotshal & Manges, LLP v. Fashion Boutique of Short
Hills, Inc., 780 N.Y.S.2d 593, 596 (1st Dep’t 2004)); Joyce v. Thompson Wigdor & Gilly, LLP,
No. 06 Civ. 15315, 2008 WL 2329227 (S.D.N.Y. June 3, 2008) (“Under New York law, where
claims of negligence, breach of contract, breach of fiduciary duty, negligent misrepresentation,
or fraudulent misrepresentation are premised on the same facts and seek identical relief as a
claim for legal malpractice, those claims are duplicative and must be dismissed.”); Schweizer v.
Mulvehill, 93 F. Supp. 2d 376, 400 & n. 29 (S.D.N.Y. Mar. 31, 2000) (“New York law clearly
provides . . . that where breach-of-fiduciary duty claims mirror allegations of malpractice, they
must be dismissed.”).
14
Here, Plaintiffs’ fiduciary duty and legal malpractice claims are plainly redundant.
Plaintiffs have premised both claims on the same legal advice and representation allegedly
provided by WTH&F. Plaintiffs have identified no other factual basis for these claims, nor do
they allege any distinct damages arising from these claims.16 Though Plaintiffs would like to
argue, in the alternative, that WTH&F’s advice breached a duty to Plaintiffs, either as clients or
non-clients, this strategy is precisely what the case law forbids. Therefore, Plaintiffs’ breach of
fiduciary duty and duty of care claims must be dismissed.17
IV.
Tortious Interference Claim
The elements of a claim of tortious interference with contract are: (1) the existence of a
valid contract between the plaintiff and a third party; (2) the defendant’s knowledge of that
contract; (3) the defendant’s intentional procurement of the third party’s breach of the contract
without justification; (4) actual breach of the contract; and (5) damages. Berman v. Sugo LLC,
580 F. Supp. 2d 191, 207 (S.D.N.Y. June 12, 2008) (citation omitted).
Plaintiffs fail to present sufficient evidence to make out a claim for tortious interference.
Plaintiffs have provided no evidence of WTH&F’s alleged intentional, improper and unjustified
interference with the federal contracts at issue. Plaintiffs’ bare allegations that WTH&F colluded
16
Plaintiffs argue that their fiduciary duty, tortious interference and unjust enrichment claims are
not ripe for summary judgment because discovery in this case has been limited to the issue of
whether there existed an attorney-client relationship. (Dkt. 46.) However, no additional
discovery is necessary with respect to Plaintiffs’ fiduciary duty and unjust enrichment claims,
both of which are being dismissed as legally defective. With respect to Plaintiff’s tortious
interference claim, as discussed infra, Plaintiffs have failed to demonstrate that there is any
additional discovery that would save this claim from summary dismissal.
17
Even if these claims are not considered duplicative, the fiduciary duty claim would
nonetheless be dismissed because of the clear evidence establishing that Plaintiffs had an
adversarial relationship with Safeco and WTH&F, Plaintiffs’ interactions with WTH&F were in
furtherance of duties that Plaintiffs owed Safeco under the indemnity agreement, and Plaintiffs
were advised to use their own legal counsel.
15
with the COE against Plaintiffs and tortiously interfered with Plaintiffs’ COE contracts in order
to advance Safeco’s agenda are not supported by any evidence. Safeco had a legal duty to
communicate with the COE regarding the COE’s default terminations of MES and the bond
demands made by COE upon Safeco, and there is no evidence that WTH&F exhibited any
improper behavior when acting in furtherance of Safeco’s contractual responsibilities under the
performance bonds.
Furthermore, Plaintiffs offer nothing to explain what possible motive
Safeco would have to collude with the COE to cause Safeco to expend millions of dollars to
make good on MES’s contracts with the COE after MES defaulted.
Plaintiffs argue that the tortious interference claim should not be dismissed because
discovery thus far has been limited to the issue of whether an attorney-client relationship existed
between Plaintiffs and WTH&F, and that Plaintiffs’ tortious interference claim, therefore, is not
ripe for decision. However, Plaintiffs have failed to identify any additional discovery that they
would conduct regarding this claim. (Pl. Opp. at 21–22.) Indeed, the discovery on the attorneyclient relationship issue provided ample opportunity for Plaintiffs to develop at least some
evidence to support its claim of collusion between WTH&F, Safeco and the COE with respect to
the three MES/HMES contracts. And yet Plaintiffs offer none. Moreover, the complaint fails to
identify any factual allegations that support Plaintiffs’ claims of collusion and tortious
interference that could be pursued in discovery. (Compl. ¶¶ 193, 196). Plaintiffs’ failure to raise
even a scintilla of evidence in support of this claim, based on the extensive discovery already
conducted in this case, demonstrates the futility of permitting Plaintiffs to continue this lawsuit
solely for the purpose of conducting a fishing expedition in pursuit of a meritless claim.
Summary judgment on Plaintiffs’ claim for tortious interference is granted in favor of
Defendants.
16
V.
Unjust Enrichment Claim
Plaintiffs claim that WTH&F was unjustly enriched because it received payments from
MES and Safeco for legal fees. (Compl. ¶ 211.)
Under New York law, a plaintiff may prevail on a claim for unjust enrichment by
demonstrating “(1) that the defendant benefitted; (2) at the plaintiff’s expense; and (3) that equity
and good conscience require restitution.” Beth Israel Med. Ctr. v. Horizon Blue Cross & Blue
Shield of New Jersey, Inc., 448 F.3d 573, 586 (2d Cir. 2006) (citing Kaye v. Grossman, 202 F.3d
611, 616 (2d Cir. 2000)). WTH&F did not receive payment, in any form, for its legal services
from Plaintiffs, and thus, WTH&F was not unjustly enriched at Plaintiffs’ expense. (Brasco
Aff.18 ¶¶ 5, 16; Katsantonis Aff.19 ¶¶ 5, 7.) WTH&F was paid by its client, Safeco, for services
performed by WTH&F for Safeco. Safeco’s payment of legal fees to its attorney, WTH&F, does
not constitute unjust enrichment. Safeco’s right to recover these fees from Plaintiffs is based
upon a separate indemnity agreement executed as part of Safeco’s surety relationship with
Plaintiffs,20 and does not form the basis for an unjust enrichment claim against WTH&F.
Accordingly, summary judgment is granted for Defendants on Plaintiffs’ unjust enrichment
claims.
18
Citations to “Brasco Aff.” refer to Affidavit of Defendant Christopher Brasco in Support of
Defendants’ Motion for Summary Judgment. (Dkt. 105.)
19
Citations to “Katsantonis Aff.” refer to the Affidavit of Defendant Vivian Katsantonis in
Support of Defendants’ Motion for Summary Judgment. (Dkt. 105–2.)
20
To the extent Plaintiffs believe that they are entitled to be compensated for having paid
Safeco’s legal fees, that issue can be raised as part of Plaintiffs’ defense in the indemnification
lawsuit brought by Safeco against Plaintiffs, 09 Civ. 03312, or as part of Plaintiffs’ lawsuit
against Safeco alleging Safeco’s bad faith breach of the Indemnity Agreement, 10 Civ. 02798.
The instant lawsuit, however, is not the proper vehicle for such a claim.
17
CONCLUSION
For the reasons discussed herein, Defendants’ motion for summary judgment is granted
in its entirety.21 The Clerk of the Court is respectfully directed to close this case.
SO ORDERED:
/s Pamela K. Chen
PAMELA K. CHEN
United States District Judge
Dated: September 2, 2015
Brooklyn, New York
21
In light of the Court’s ruling granting Defendants’ motion for summary judgment, Plaintiffs’
belated request to amend the caption of the pleadings (Dkt. 120) is denied as moot.
18
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?