Black v. Schwartz et al

Filing 73

MEMORANDUM & ORDER granting in part and denying in part 65 Motion for Summary Judgment - For the foregoing reasons, Defendants' summary judgment motion is GRANTED IN PART and DENIED IN PART. Defendants' motion for attorneys' fees is DENIED. Going forward, the parties shall heed the directive in footnote two. So Ordered by Judge Joanna Seybert on 9/17/2012. C/ECF (Valle, Christine)

FILED 
CLERK 

9/17/2012 1:57 pm

U.S. DISTRICT COURT 
EASTERN DISTRICT OF NEW YORK 
LONG ISLAND OFFICE 

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
--------------------------------------X
PAUL BLACK,
Plaintiff,
-against-

MEMORANDUM & ORDER
09-CV-2271(JS)(GRB)

JEFFREY S. SCHWARTZ and LAW OFFICE OF
JEFFREY S. SCHWARTZ,
Defendants.
--------------------------------------X
APPEARANCES
For Plaintiff:
Peter D. Baron, Esq.
Baron & Pagliughi, PLLC
85 Main Street, Suite A
Cold Spring Harbor, NY 11724
For Defendants:

Douglas S. Langholz, Esq.
Morgan Melhuish Abrutyn
39 Broadway, Suite 1701
New York, NY 10006

SEYBERT, District Judge:
Plaintiff

Paul

Black

(“Plaintiff”)

sued

Defendants

Jeffrey S. Schwartz and the Law Office of Jeffrey S. Schwartz
(together, “Defendants”) for legal malpractice arising out of
sanctions that Plaintiff was forced to pay in an earlier lawsuit
in California.
for

summary

Pending before the Court are Defendants’ motions

judgment

(Docket

Entry

65)

and

attorneys’

fees

relating to a discontinued portion of this suit (Docket Entry
46).

Defendants’ motion for summary judgment is GRANTED IN PART

and DENIED IN PART.

Their motion for attorneys’ fees is DENIED.

BACKGROUND
In 2005, Plaintiff retained Defendants to pursue civil
claims

against

a

real

estate

development

company

and

other

defendants in a case arising out of a real estate deal gone bad.
The facts of that case, Black v. Del Webb Communities, Inc., No.
05-CV-8743 (C.D. Cal.) (the “California Action”), are set forth
in U.S. District Judge S. James Otero’s December 5, 2006 summary
judgment decision (Defs. Ex. M) and his March 27, 2007 decision
sanctioning Plaintiff for various litigation misconduct (Defs.
Ex. K (the “Sanction Order”)).

The Sanction Order also contains

a near-comprehensive discussion of the facts relevant to this
case.

Briefly, though, the Court will provide a few background

facts to put the following analysis into context.
The

California

deal that didn’t pan out.
well for Plaintiff.

Action

centered

on

a

Nevada

housing

To put it mildly, the case did not go

He had sued the developer on the deal and

others, including Land America Financial Group (“Land America”).
Land America was the corporate grandparent of Lawyer’s Title of
Nevada, Inc. (“LTN”), the escrow agent for the project.

At the

motion to dismiss stage, the court found that an arbitration
agreement covered most of Plaintiff’s case and dismissed all
defendants except for Land America.

Later, the court awarded

Land America summary judgment because, among other reasons, Land
America (as opposed to its subsidiary) had nothing to do with
2

the

events

that

precipitated

the

lawsuit.

Then,

the

court

sanctioned Plaintiff and ordered him to pay Land America the
attorneys’ fees it incurred in defending the case.
The misconduct underlying the fee award is detailed in
the

thorough

Sanction

Order.

Suffice

it

to

say

here

that

Plaintiff and Defendants--Plaintiff’s counsel in the California
Action--sharply

disagree

as

to

who

should

bear

the

payment.

Plaintiff paid the sanction and, in the instant action, is suing
Defendants in legal malpractice for repayment of that money.
DISCUSSION
The

Court

first

addresses

Defendants’

motion

for

summary judgment and then considers their motion for attorneys’
fees.
I. Summary Judgment
Defendants’ summary judgment motion is granted in part
and denied in part.
A. Legal Standard
Summary judgment is only appropriate where the moving
party can demonstrate that there is “no genuine dispute as to
any material fact” and that the moving party is entitled to
judgment

as

a

matter

of

law.

FED. R. CIV. P.

56(a).

In

considering this question, the Court considers “the pleadings,
depositions, answers to interrogatories and admissions on file,
together with any other firsthand information including but not
3

limited to affidavits.”

Nnebe v. Daus, 644 F.3d 147, 156 (2d

Cir. 2011); see also Celotex Corp. v. Catrett, 477 U.S. 317,
322, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986); McLee v.
Chrysler Corp., 109 F.3d 130, 134 (2d Cir. 1997); FED. R. CIV. P.
56(c).

“In assessing the record to determine whether there is a

genuine issue to be tried . . . the court is required to resolve
all ambiguities and draw all permissible factual inferences in
favor of the party against whom summary judgment is sought.”
McLee, 109 F.3d at 134.

The burden of proving that there is no

genuine issue of material fact rests with the moving party.
Gallo v. Prudential Residential Servs., L.P., 22 F.3d 1219, 1223
(2d Cir. 1994) (citing Heyman v. Commerce & Indus. Ins. Co., 524
F.2d 1317, 1320 (2d Cir. 1975)).
non-moving
LaBounty

party

v.

must

Coughlin,

“come
137

Once that burden is met, the

forward

F.3d

68,

with
73

(2d

specific
Cir.

facts,”

1998),

to

demonstrate that “the evidence is such that a reasonable jury
could return a verdict for the nonmoving party,” Anderson v.
Liberty Lobby, 477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L.
Ed. 2d 202 (1986).
not suffice.”
1986).

“Mere conclusory allegations or denials will

Williams v. Smith, 781 F.2d 319, 323 (2d Cir.

And “unsupported allegations do not create a material

issue of fact.”

Weinstock v. Columbia Univ., 224 F.3d 33, 41

(2d Cir. 2000).

4

B. Analysis
The

elements

of

a

legal

malpractice

claim

under

California law1 are “(1) the duty of the attorney to use such
skill,

prudence,

and

diligence

as

members

of

his

or

her

profession commonly possess and exercise; (2) a breach of that
duty; (3) a proximate causal connection between the breach and
the resulting injury; and (4) actual loss or damage resulting
from the attorney's negligence.”

Hall v. Kalfayan, 190 Cal.

App. 4th 927, 933, 118 Cal. Rptr. 3d 629, 632-33 (Cal. Ct. App.
2010) (quoting Coscia v. McKenna & Cuneo, 25 Cal. 4th 1194,
1199, 108 Cal. Rptr. 2d 471, 25 P.3d 670 (2001)).
Defendants’

brief

raises

addresses each in turn.
cannot

prove

that

five

arguments.

The

Court

First, Defendants argue that Plaintiff

their

negligence

caused

Plaintiff’s

injury

because the sanction was premised on discovery responses that
Plaintiff himself verified under penalty of perjury.
10-11.)
narrow

(Defs. Br.

This argument is unpersuasive because it relies on too
a

reading

of

the

Sanction

Order.

The

misconduct

described therein goes beyond discovery violations and includes
the filing of frivolous motions and the “reckless” decision to
sue Land America in the first place.

(Sanction Order 3.)

Second, Defendants argue that California law does not
permit parties who are hit with sanctions to recover the amount
1

The parties agree that California law governs this case.
5

of the sanctions from their lawyers.
Jocer

Enterprises,

Inc.

v.

Price,

(Defs. Br. 13.)
Roper,

They cite

Majeski,

Kohn

&

Bentley, 183 Cal. App. 4th 559, 107 Cal. Rptr. 3d 539 (Cal. Ct.
App. 2010) for the proposition “that an award for attorney fees
imposed by the Court a client [sic], individually, may not be
recovered as damages in a subsequent legal malpractice action.”
(Defs. Br. 13.)
has

with

the

Given the loose relationship Defendants’ brief
facts

in

this

case--see

below--it

unsurprising that Jocer stands for no such thing.
court

there

held

that

the

attorneys’

fee

is

Rather, the

award

recoverable under an equitable indemnification theory.
Rptr. 3d at 575.

perhaps

was

not

107 Cal.

It did not reach whether the plaintiffs stated

a claim under a legal malpractice theory because it concluded
that such a claim was time-barred.

Id. at 576.

Third, Defendants argue that Plaintiff’s injury was
really caused by his not having a factual basis to prevail on
the merits in the California Action.

This is a variation of

Defendants’ first argument, and it has at least two flaws.

One,

it is premised on a flagrantly misleading characterization of
Plaintiff’s expert’s deposition.

Noting that Plaintiff’s expert

testified that Defendants may have had a colorable basis to sue
LTN--the

Land

America

subsidiary--Defendants

transform

this

opinion into a finding that Defendant’s decision to sue Land
America

was

not

negligent.

(Defs.
6

Br.

16.)

In

fact,

Plaintiff’s expert agreed hypothetically that there might have
been an arguable claim against LTN but he was clear that Land
America would not have been a proper target.
79-80, 94.)

(Defs. Ex. M at

Defendants have the gall to make this argument

again in their reply (see Defs. Reply 4) even after Plaintiff
pointed out that it is based on an incorrect reading of the
expert’s deposition (Pl. Opp. 5-6).
the claimed injury in this case.
he

would

necessarily

California

Action;

have

Two, this argument confuses

Plaintiff does not claim that

prevailed

rather,

he

on

simply

the

argues

merits

in
but

that

the
for

Defendants’ malpractice, he would not have been sanctioned for
misconduct.
Fourth,

Defendants

argue

that

Plaintiff

is

not

entitled to recover the attorneys’ fees he incurs in pursuing
the present case.

(Defs. Br. 17.)

Plaintiff has not answered

this argument and, in any event, the Court is persuaded that he
may not recover his legal fees associated with this case.

See

Loube v. Loube, 64 Cal. App. 4th 421, 430, 74 Cal. Rptr. 2d 906
(Cal.

Ct.

App.

1998).

This

branch

of

Defendants’

summary

judgment motion is granted.
Fifth, Defendants argue that Plaintiff cannot prove
negligence arising out of their failure to advise him of their
conflict

of

interest

in

defending

against

attorneys’ fee motion in the California Action.
7

Land

America’s

(Defs. Br. 18.)

They

point

to

Plaintiff’s

own

expert,

who

testified

that

notwithstanding Defendants’ alleged failure to advise Plaintiff
to consult independent counsel concerning the sanction motion,
Defendants litigated Land America’s fee request appropriately.
(See Defs. Ex. M at 117 (“Q: In [Schwartz’s] brief or in his
oral presentation or in his responses, anything that you can
point to that shows that he was negligent in representing Black
during that phase of the litigation? A. No.”).)

This unrebutted

evidence entitles Defendants to summary judgment on this aspect
of Plaintiff’s claim.
In sum, although there remain difficult issues to try,
Defendants

met

their

summary

judgment

burden

only

in

part.

Their motion is granted insofar as Plaintiff may not (1) recover
his legal fees in this case or (2) recover on his theory that
Defendants’ failure to advise him of a conflict of interest
proximately caused the sanction.

It is denied in all other

respects.
II. Defendants’ Attorneys’ Fees Motion
In

a

separate

motion,

Defendants

seek

an

order

pursuant to 28 U.S.C. § 1927 (“Section 1927”) and the Court’s
inherent power awarding them the legal fees they incurred in
defending a now-discontinued portion of this case.2

2

The basis

As an initial matter, the Court notes that Defendants’
citations to evidence in this motion are virtually
8

for the motion is essentially that Plaintiff’s now-discontinued
claim that Defendants were negligent in not successfully pursing
Plaintiff’s

claims

against

the

defendants

who

were

dismissed

from the California Action because of the arbitration agreement
was a non-starter.
recovery

from

They argue that Plaintiff could have sought

those

defendants

in

arbitration

after

the

California Action was dismissed and, further, the statute of
limitations had not run on Plaintiff’s arbitration rights until
well after he brought the present malpractice suit.

According

to Defendants, therefore, Plaintiff had no hope that he could
show

that

Defendants

proximately

caused

him

to

lose

out

as

against the arbitration-eligible defendants.
As is relevant to this motion, the Court may impose
sanctions

against

a

client

or

his

attorney

pursuant

to

its

inherent power and against an attorney pursuant to Section 1927.
“An award of sanctions under the court’s inherent power requires

meaningless. The exhibits, which are referred to by letter
throughout Defendants’ papers, were not included with
Defendants’ courtesy copies to the Court (in violation of the
undersigned’s individual motion practices), and they are not
labeled by letter on ECF. More troublingly, citations to
Schwartz’s 167-page deposition do not contain page numbers (the
absence of page references was an issue in Defendants’ summary
judgment brief as well). In the future, all parties in this
action will provide the Court with courtesy copies of
evidentiary materials relied on in their papers and their briefs
will include specific record citations. See Amnesty Am. v. Town
of W. Hartford, 288 F.3d 467, 470-71 (2d Cir. 2002) (Sotomayor,
J.). The Court may refuse to consider future submissions that
do not comply with this Order.
9

both ‘clear evidence that the challenged actions are entirely
without color, and [are taken] for reasons of harassment or
delay or for other improper purposes[,] and a high degree of
specificity in the factual findings of [the] lower courts.’”
Revson v. Cinque & Cinque, P.C., 221 F.3d 71, 78 (2d Cir. 2000)
(quoting Oliveri v. Thompson, 803 F.2d 1265, 1272 (2d Cir. 1986)
(alterations in original) (emphasis omitted)).

Similarly, an

award under Section 1927 “is proper when the attorney's actions
are so completely without merit as to require the conclusion
that they must have been undertaken for some improper purpose
such

as

delay.”

Id.

(emphasis omitted)).

(quoting

Oliveri,

803

F.2d

at

1273

Bad faith is the touchstone for an award

under either the Court’s inherent power or Section 1927.

See

id.
Having considered the parties’ arguments against the
background of this case, the Court concludes that sanctions are
not appropriate for several reasons.
that

Plaintiff’s

unsuccessful

claim

litigation

against
against

First, although it appears

Defendants
the

relating

to

the

arbitration-eligible

defendants was thin (at best), Plaintiff withdrew this claim
before Defendants resorted to dispositive motion practice.3

To

be sure, this is not a controlling factor, and Defendants aver

3

Defendants moved to implead Plaintiff’s attorney prior to
Plaintiff’s withdrawing the discontinued claim.
10

that they expended resources preparing a summary judgment motion
on this claim.
sanctions

in

Nevertheless, this consideration weighs against
this

particular

case

because

it

undercuts,

somewhat, the idea that Plaintiff brought this claim for an
improper purpose.
cannot

ascertain

Second, on the current record, the Court
how

much

Defendants

spent

defending

the

discontinued portion of this case versus how much they spent
defending the legal malpractice claim discussed in Section I.
Defendants’ attorney states that “roughly 90% to 95%” of his
time

as

(Docket

of

February

Entry

46-21

2011
¶

13),

related
but

to

the

Defendants

discontinued
do

formal breakdown to support this contention.

not

claim

provide

a

Finally, in light

of Defendants’ blatant mischaracterizations discussed above, the
Court is not inclined to find that either party has behaved
worse than the other.

Cf. Schlaifer Nance & Co., Inc. v. Estate

of Warhol, 194 F.3d 323, 341 (2d Cir. 1999) (“Although, in light
of our disposition of this appeal, we need not address whether
such unclean hands may preclude the imposition of sanctions, we
observe

that

a

court

considering

sanctions

can

and

should

consider the equities involved before rendering a decision.”).

11

CONCLUSION
For
judgment

the

motion

Defendants’

is

motion

foregoing
GRANTED
for

reasons,
IN

PART

attorneys’

Defendants’
and

fees

is

DENIED

summary
IN

DENIED.

PART.
Going

forward, the parties shall heed the directive in footnote two.
SO ORDERED.

/s/ JOANNA SEYBERT______
Joanna Seybert, U.S.D.J.
Dated:

September 17, 2012
Central Islip, New York

12