Thieriot et al v. Jaspan Schlesinger Hoffman, LLP et al

Filing 82

ORDER granting 78 Motion for Reconsideration for the 66 MOTION for Summary Judgment filed by Jaspan Schlesinger Hoffman, LLP, Lisa M. Golden, Alan K. Hirschhorn, Seth H. Ross, Stephen P. Epstein. For the foregoing reasons, defendan ts' motion for reconsideration is hereby granted and summary judgment is granted in favor of defendants on all of plaintiff's claims and the complaint is dismissed in its entirety. Defendants' counterclaim for legal fees and costs is to be determined under a quantum meruit theory and is referred to Magistrate Judge A. Kathleen Tomlinson to report and recommend to the undersigned. So Ordered by Judge Thomas C. Platt on 8/27/2013. (Padilla, Kristin)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

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*

ELIZABETH THIERIOT, individually and as
TRUSTEE of the ELIZABETH THIERIOT
REVOCABLE TRUST, and the ELIZABETH
THEIRIOT REVOCABLE TRUST,
Plaintiffs,

AUG 21 2013

*

LON{; l~kAND OFFICE
07-CV-5315 (TCP)

-against-

MEMORANDUM
AND ORDER
JASPAN SCHLESINGER HOFFMAN, LLP,
STEPHEN P. EPSTEIN, LISA M. GOLDEN,
ALAN K. HIRSCHHORN, and SETH H. ROSS,
Defendants.

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PLATT, District Judge.

Before the Court is defendants' motion for reconsideration of this Court's Order dated
March 6, 2013. Defendant's motion for reconsideration is hereby GRANTED because, as
explained in detail below, plaintiff's trust was invalid at its creation. As a result, any conveyance
by plaintiff to the trust was likewise void and plaintiff retained ownership of her real property.
Thus, she was the actual owner/seller named in the real estate contract at issue in the state court
specific performance litigation. Defendants could not, therefore, raise the lack of ownership
defense in that litigation and their failure to do so does not constitute legal malpractice as a
matter oflaw.
Defendants' counterclaim for legal fees and costs is GRANTED to the extent that the
sum due them by plaintiff, if anything, will be calculated under a quantum meruit theory.

I. Relevant Background
The detailed facts of this case are set forth in this Court's Order dated March 6, 2013 (DE
76) ("Order") and will only be repeated here as necessary. Defendants move for reconsideration

of the Order denying summary judgment on plaintiff's claims and defendant's counterclaims.
Plaintiff Elizabeth Thieriot ("plaintiff'') is the sole trustee and sole beneficiary of a
revocable trust established December 21, 2001. Plaintiffs trust was amended on March 8, 2002
and April 8, 2003. Plaintiff transferred her real property to the trust which eventually became the
subject of a specific performance lawsuit in New York State Supreme Court.
In June 2003, plaintiff accepted an offer to purchase her real property from the Kumars,
who became the plaintiffs in the New York State proceeding. Defendant law firm drafted the
real estate contract for the sale of the premises and listed plaintiff individually, and not her trust,
as the owner/seller. After advising her attorneys that she was unable to obtain certain affidavits
required by the title search company, plaintiff declined to go through with the closing for the sale
of the property on the basis she could not convey marketable title.
The Kumars then sued her for specific performance in New York State Supreme Court.
Plaintiff was represented by defendants in that proceeding. After a bench trial, the Honorable
Thomas Feinman, New York Supreme Court, Nassau County, issued a decision holding that the
Kumars were entitled to specific performance of the real estate contract. After judgment was
entered on behalf of the Kumars, defendants appealed Judge Feinman's decision. The decision
granting the Kumars specific performance was ultimately affirmed by New York's Appellate
Division. Shortly thereafter, the law firm was discharged and plaintiff's current attorney,
Theodore Steingut, was retained by plaintiff. Plaintiff commenced this action alleging, inter alia,
legal malpractice against defendant law firm in December 2007.
By Order dated March 6, 2013, this Court denied defendants' motion for summary
judgment on plaintiffs claims for legal malpractice and rescission of the parties' fee arrangement
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and her request for a declaratory judgment that the law firm was not owed any additional fees.
Defendants also sought judgment on their counterclaims for the quantum meruit value of their
services in the sum of $29, I 05 .16, for failure to pay the unopposed account on demand and for
breach of contract, which was also denied pending trial.
With respect to plaintiff's legal malpractice claim, the Court held that there were material
issues of fact as to whether the law firm's decision to admit that plaintiff, and not her trust,
owned the premises in her answer to the New York State specific performance action constituted
malpractice. The Court further held that there were questions of fact with respect to the law
firm's decision not to raise the lack of ownership defense in the state lawsuit, i.e., whether the
decision was part of a reasonable strategy or if their conduct fell below the standard of due care.

II. Discussion
A.

Legal Standard for a Motion for Reconsideration
"The threshold for prevailing on a motion for reconsideration is high." Nakshin v.

Holder, No. 19 Civ. 1676,2010 WL 92776, at *I (2d Cir. Jan. 12, 2010). Thus, reconsideration
of a " 'previous order is an extraordinary remedy to be employed sparingly in the interests of
finality and conservation of scarce judicial resources.' " In re Health Management Systems, Inc.,
113 F. Supp. 2d 613, 614 (S.D.N.Y. 2000) (quoting Wendy's Int'l, Inc. v. Nu-Cape Construction,
Inc., 169 F.R.D. 680,685 (M.D. Fla. 1996)). "The standard for granting such a motion is strict,
and reconsideration will generally be denied unless the moving party can point to controlling
decisions or data that the court overlooked-matters, in other words, that might reasonably be
expected to alter the conclusion reached by the court." Shrader v. CSX Transportation, Inc., 70
F.3d 255, 257 (2d Cir. 1995) (citing Schonberger v. Serchuk, 742 F. Supp. 108, 119 (S.D.N. Y.
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1990); Adams v. United States, 686 F. Supp. 417,418 (S.D.N.Y. 1988)).
Eastern District of New York Local Rule 6.3 requires that the motion "set[] forth
concisely the matters or controlling decisions which counsel believes the court has overlooked."
A motion for reconsideration is not a vehicle to reargue "those issues already considered when a
party does not like the way the original motion was resolved." In re Houbigant, Inc., 914 F.
Supp. 997, 1001 (S.D.N.Y. 1996). "Moreover, the parties 'may not address facts, issues or
arguments not previously presented to the Court,' US. Titan v. Guangzhou Zhen Hua Shipping
Co., Ltd., 182 F.R.D. 97, 100 (S.D.N.Y. 1998) (citations omitted), because a motion to

reconsider should never act 'as a substitute for appealing from a final judgment.'" Orlik, 2010
WL 1379776, at *2 (quoting Bonnie & Co. Fashions, Inc. v. Bankers Trust Co., 170 F.R.D. Ill,
113 (S.D.N.Y. 1997)(citation omitted). See In re Worldcom, Inc. Securities Litigation, 308 F.
Supp. 2d 214,224 (S.D.N.Y. 2004) ("A motion for reconsideration should be granted only where
the moving party demonstrates that the Court has overlooked factual matters or controlling
precedent that were presented to it on the underlying motion and that would have changed its
decision."). Reconsideration, therefore, "should not be granted where the moving party seeks
solely to relitigate an issue already decided." Shrader, 70 F.3d at 257.

B.

Defendants' Motion for Reconsideration
1.

Plaintiff's Legal Malpractice Claim

Defendants make virtually the same arguments on reconsideration as they did in their
motion for summary judgment, i.e., that their strategy not to use the lack of ownership defense
was reasonable and that the claim can be determined summarily. Defendants contend that the
defense was not viable because plaintiff was the settlor, sole trustee and sole beneficiary of her
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revocable trust and, consequently, had the power to do what she was contractually obligated to
do: to wit, convey the property. They contend the defense would have been dismissed as
meritless or could have subject the plaintiff to sanctions and that raising the defense would
appear to be in bad faith at a time when her credibility was crucial.
As in their original motion for summary judgment, defendants do not cite to any case law
or statutory authority for their proposition that plaintiff and the trust are one in the same, giving
her the power to convey the property in her individual capacity. Their unsupported argument
merely begged the question of the value of creating a trust if title to its corpus is so easily set
aside and was not considered. In its original Order, the Court also noted Judge Feinman's
concern with the identity of the seller in the specific performance action. Accordingly, it held
that there was a question of fact as to whether defendants' failure to raise the lack of ownership
defense was part of a reasonable strategy or if it fell below the standard of due care owed by
attorneys to their clients. Likewise, the Court also held that there was a material issue of fact as
to why defendants opted to admit that plaintiff, and not the trust, owned the property in her
answer to the Kumars' specific performance action.
A trust, however, "contemplates the holding of property by one for the benefit of another,
... [and consequently,] the same person may not at the same time be both sole trustee and sole
beneficiary of the same interest." Weeks v. Frankel, 90 N.E. 969, 971 (N.Y. 1910). On the other
hand, revocable trusts do not merge or become invalid when "a person, including but not limited
to the creator of the trust, is or may become the sole trustee and the sole holder of the present
beneficial interest therein, provided that one or more other persons hold a beneficial interest
therein." NY Est. Powers & Trusts§ 7-1.1 (emphasis added). See In re Fontanella's Estate, 304
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N.Y.S.2d 829,831 (N.Y. App. Div. 1969) ("There are four essential elements of a valid trust of
personal property: (I) a designated beneficiary; (2) a designated trustee not the beneficiary; (3) a
fund or other identifiable property; and (4) the actual delivery of the fund or other property to the
trustee with the intention of passing legal title thereto to him as trustee." (citing Brown v. Spohr,
73 N.E. 14, 16 (N.Y. 1904)).
Defendants have repeatedly represented that plaintiff is the settlor, sole trustee and sole
beneficiary of her trust. 1 The trust, then, was invalid at the time of its creation because plaintiff
was the sole trustee and sole beneficiary. Consequently, any conveyance by plaintiff to the trust
was void and the trust did not hold title to the property. Under these circumstances, plaintiff may
not use the lack of ownership defense because in actuality, she is the owner/seller and was the
proper signatory to the real estate contract with the Kumars. As a result, defendants cannot be
held liable for failing to raise the defense in the specific performance litigation and there is no
longer any question of fact as to whether they should have done so.
With respect to plaintiffs other allegations of malpractice, the Court originally focused
on what it saw as the obstacles to granting defendants' motion for summary judgment on the
legal malpractice claim. Turning now to plaintiffs other allegations in her complaint, she
complains that defendants were negligent by failing to communicate to the Kumars' attorney
plaintiffs reasons for not attending the real estate closing. Had defendants properly
communicated with the title company, according to the complaint, it may have waived its
demand for an affidavit from plaintiffs husband. As defendants point out, however, this

1. Who initially created, or attempted to create, the trust or made the subsequent amendments is unclear from the
allegations.

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allegation from plaintiffs legal malpractice claim fails the "but for" test, i.e., plaintiff would
have to allege that but for defendants purported negligence in not advising the Kumar's attorney
that plaintiff was unable to close, the deal would have closed. 2 Plaintiff does not so allege and
nor could she. Rather, when the Kumars' attorney offered to arrange a new closing date to give
plaintiff the opportunity to fulfill her contractual obligations, plaintiff instructed defendants, for
the fourth time, to return the Kumars' deposit. Def. Mot. Summ. J., Exh. D-25.
Plaintiffs complaint also alleged that defendants committed malpractice by failing to
condition the return of the Kumars' down payment on a release of their rights pursuant to the real
estate contract. There can be no doubt, however, that the Kumars were entitled to the
unencumbered return of their deposit given plaintiff's refusal to go through with the closing.
Furthermore, by her own admission, plaintiff demanded that defendants return the down payment
to the Kumars at least four times and advised the law firm that she would retain new counsel if
they failed to do so. See id. Thus, the alleged failure of defendants to condition return of the
down payment does not amount to legal malpractice.
Additionally, the complaint alleged that defendants committed legal malpractice by
failing to advise plaintiff to resign as trustee of her revocable trust. Having held that the trust
was invalid at its inception, the law firm's alleged failure to advise plaintiff to resign as trustee of
a non-existent trust cannot form the basis of a legal malpractice claim.
Plaintiff also alleged that defendants were negligent by failing to advise her to accept
settlement offers in the specific performance litigation. As defendants point out, however,

2. The facts and relevant law are discussed at length in the Order denying defendants' motion for summary
judgment.

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plaintiff neither alleges causation, i.e., that she would have accepted the settlement offers, nor
does the record in this case so demonstrate. See Bauza v. Livington, 836 N.Y.S.2d 645, 647
(N.Y. App. Div. 2007) ("Here, the plaintiffs failed to demonstrate that, but for the defendants'
alleged negligence, they would have accepted the offer of settlement and would not have
sustained any damages."); Cannistra v. O'Connor, McGuinness, Conte, Doyle, Oleson & Collins,
728 N.Y.S.2d 770, 772 (N.Y. App. Div. 2001) ("Here, the plaintiffs failed to demonstrate that,
but for the defendants' alleged negligence, they would have accepted the County's settlement
offer and not have sustained any damages."). By plaintiff's own admission, offers to settle were
communicated to her but none were accepted. Def. 56.1 (a) Strnt. ~ 48; Pit. 56.1 (b) Strnt. ~ 48.
Nor does the record demonstrate that plaintiff would have settled based on her attorneys' advice.
Given the foregoing, defendants' motion for summary judgment on this portion of plaintiff's
legal malpractice claim is granted.
Finally, plaintiff complains that defendants were negligent in appealing Judge Feinman's
decision granting the Kumars specific performance rather than waiting until final judgment in the
case. In Apri12005, New York's Appellate Division granted defendants' request for a stay while
they appealed Judge Feinman's decision. In August 2005, the Appellate Division dismissed the
appeal of its own motion because there is no appeal from a decision. Plaintiff contends that the
matter was further delayed by defendants' conduct and that she incurred additional and
unnecessary attorneys' fees.
As the facts demonstrate, however, plaintiff retained the right to take an appeal, and in
fact did appeal, after final judgment in favor of the Kumars was entered with the Nassau County
Clerk's office in October 2005. Because plaintiff did not lose the right to appeal Judge
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Feinman's decision granting the Kumars specific performance, the Court holds that she did not
suffer the type of damages necessary to state a legal malpractice claim.
Accordingly, given all of the foregoing and upon reconsideration, defendants' motion for
summary judgment on plaintiff's legal malpractice claim is granted not because plaintiff and her
trust were the same entity for the purpose of conveying the property, but because the trust was
invalid from its inception. Plaintiff could not have used the defense that she was neither an
owner nor a signatory to the real estate contract in the specific performance action because her
property was never transferred to the non-existent and invalid trust. She cannot demonstrate,
therefore, that defendants committed malpractice by not raising the lack of ownership defense
and by admitting that plaintiff, and not the trust, owned the property in her answer to the
Kumar's complaint. Plaintiffs additional allegations did not amount to legal malpractice as
demonstrated above. Thus, there is no basis for plaintiffs legal malpractice complaint.

2.

Plaintiff's Claim for Rescission of the Fee Agreement

In their motion for summary judgment, defendants also moved for judgment on plaintiff's
claim for rescission of the parties' fee agreement and disgorgement of legal fees billed on and
after August 15,2003. 3 In its previous Order, the Court declined to address this claim until
plaintiff's legal malpractice claim was determined. Having granted judgment to defendants on
that claim, the undersigned will consider defendants' motion for summary judgment on
plaintiff's claim for rescission of the parties' fee agreement.
"Rescission is defined as the act of abrogating, cancelling, vacating or annulling; the
3. As set forth in the facts in the March 6, 2013 Order, August 15, 2003 was the day ofthe scheduled closing
between plaintiff and the Kumars, which plaintiff declined to attend on the basis she could not convey clear title.

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undoing of a thing." Carlson v. Shepard Pontiac, Inc., 314 N.Y.S.2d 77, 80 (N.Y. Sup. Ct.
1970). "The purpose of rescission is to restore the parties to the contract to the status, as nearly
as may be possible, existing at the time immediately prior to the making of the contract." Id It
is within a court's equitable powers to order the rescission of a contract where injury will result
from its enforcement. Gantell v. Friedmann, 197 N.Y.S.2d 605, 608 (N.Y. Sup. Ct. 1959).
Under New York law, the "[r]escission of a contract is 'an extraordinary remedy.' " C3

Media & Mktg. Group, LLC v. Firstgate Internet, Inc., 419 F. Supp. 2d 419, 436 (S.D.N. Y.
2005) (quoting Krumme v. WestPoint Stevens, Inc., 238 F.3d 133, 143 (2d Cir. 2000)). Thus,
rescission is "appropriate only where the breach is found to be material and willful, or, if not
willful, so substantial and fundamental as to strongly tend to defeat the object of the parties in
making the contract." Krumme, 238 F.3d at 143 (quoting Canjieldv. Reynolds, 631 F.2d 169,
178 (2d Cir. 1980)). "Because rescission is an equitable remedy, it 'will not be granted unless
plaintiff lacks an adequate remedy at law.'" C3 Media, 419 F. Supp. 2d at 435 (quoting Faden

Bayes Corp. v. Ford Motor Co., No. 97 Civ. 1867, 1997 WL 426100, at *2 (S.D.N.Y. July 30,
1997)).
Plaintiffs complaint alleges that the fees billed and collected by defendants on and after
August 15, 2003 were unreasonable and the agreement to pay those fees is invalid and
unenforceable. Plaintiff also alleges that defendants were unjustly enriched by collecting fees
from plaintiff which were excessive, unreasonable and improper. Thus, according to plaintiff,
equity and good conscience demand the return of those fees and plaintiff is entitled to rescind the
fee agreement and to restitution of the monies paid to defendants.

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In support of their motion for summruy judgment, defendants argue that plaintiffs

rescission and disgorgement claims are duplicative of her legal malpractice claim in that both
seek to recover monies sought in the malpractice claim.
Defendants' motion for summruy judgment on plaintiffs claim for rescission is granted
because plaintiff has not demonstrated that she lacks an adequate remedy at law, i.e., money
damages, as compensation for defendants' alleged malpractice. See Rudman v. Cowles
Commc 'ns, Inc., 280 N.E.2d 867, 874 (N.Y. 1972) ("Moreover, the equitable remedy is to be
invoked only when there is lacking complete and adequate remedy at law and where the status
quo may be substantially restored."); C3 Media, 419 F. Supp. 2d at 436 ("Where the plaintiff can
fully reap the benefit of its bargain through an award of legal damages, there is no call to invoke
the equitable powers of the court and rescind the contract."); Knoll v. Equinox Fitness Clubs, No.
02 Civ. 9120, 2003 WL 23018807, at *6 (S.D.N.Y. Dec. 22, 2003) (holding that rescission
appropriate "where the non-breaching party has been deprived of the reasonably expected benefit
ofthe bargain in a way that cannot be compensated").
Moreover, defendants' motion for judgment on plaintiffs legal malpractice claim has
been granted and plaintiff states no other grounds which would entitle her to rescind the parties'
fee agreement. Nor would granting rescission put this case at its previous status quo because the
Kumars eventually purchased plaintiffs real property despite her initial refusal to close the deal
in August 2003.
Because judgment was granted to defendants on plaintiffs claim for rescission, she is not
entitled to disgorgement. See Goldstein v. Cogswell, No. 85 Civ. 9256, 1992 WL 131723, at* 19
(S.D.N.Y. June I, 1992) (holding that when rescission is granted, the payee is entitled to
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disgorgement of monies paid pursuant to the contract).
For these reasons, defendants' motion for summary judgment on plaintiffs rescission and
disgorgement claims is granted.

3.

Plaintiff's Request for a Declaratory Judgment

Plaintiff also seeks a declaratory judgment that she is not indebted to defendants or the
law firm for any amount of money, including the $28,220.56 defendants claim is due for legal
services. In their motion for summary judgment, defendants argue that the Court should exercise
its discretion and dismiss plaintiffs request.
Pursuant to the Declaratory Judgment Act:
In a case of actual controversy within its jurisdiction, ... any court of the United
States, upon the filing of an appropriate pleading, may declare the rights and other
legal relations of any interested party seeking such declaration, whether or not
further relief is or could be sought.

28 U.S.C. § 2201. "A declaratory judgment action is ripe for adjudication if 'the facts alleged,
under all the circumstances, show that there is a substantial controversy, between parties having
adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a
declaratory judgment.'" Atlantic Cas. Ins. Co. v. Value Waterproofing, Inc., 918 F. Supp. 2d
243,261 (S.D.N.Y. 2013) (quoting In re Prudential Lines Inc., 158 F.3d 65,70 (2d Cir. 1998)).
Summary judgment having been granted to defendants on plaintiffs legal malpractice
and rescission claims, there is no substantial controversy between the parties that warrants the
issuance of a declaratory judgment. Plaintiffs request is therefore denied.

C.

Defendants' Counterclaims
In their original motion, defendants asked for summary judgment on the three claims in
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their answer, which concern monies purportedly owed to them by plaintiff for outstanding legal
fees and costs. Previously, the Court declined to address these counterclaims because of the
outstanding material issues of fact with respect to plaintiffs legal malpractice claim. Having
determined that defendants are entitled to summary judgment on that claim, however, it now
turns to defendants' counterclaims.
Defendants seek the sum of $28,220.56 plus interest. They set forth three theories of
recovery: (I) quantum meruit; (2) breach of contract; and (3) account and demand stated.
Apparently, there was no written agreement between the parties with respect to retaining
defendants, hourly billing or costs. Nor does it appear that defendants submitted time records or
evidence of plaintiff's costs. In light of that and in the interests of fairness and justice, the
amount owed by plaintiff to defendants, if anything, shall be determined based on a quantum
meruit theory.
Accordingly, the remainder of this case is hereby referred to Magistrate Judge A.
Kathleen Tomlinson to report and recommend on the amount oflegal fees and costs due to
defendants based on quantum meruit. The parties are hereby directed to communicate with
Magistrate Judge Tomlinson's Chambers to arrange a briefing schedule.

III. Conclusion
For the foregoing reasons, defendants' motion for reconsideration is hereby GRANTED
and summary judgment is granted in favor of defendants on all of plaintiffs claims and the
complaint is dismissed in its entirety. Defendants' counterclaim for legal fees and costs is to be
determined under a quantum meruit theory and is referred to Magistrate Judge A. Kathleen

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•

Tomlinson to report and recommend to the undersigned.
SO ORDERED.

Dated: AugustZ,J, 2013
Central Islip, New York

r

fi/V

Thomas C. Platt, U.S.D.J.

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