Byrne & Storm, P.C. v. Handel et al

Filing 36

MEMORANDUM-DECISION and ORDER - That Byrne & Storm's 19 Motion for Summary Judgment is GRANTED IN PART and DENIED IN PART as follows: GRANTED as to defendants' counterclaim of legal malpractice, which counterclaim is DISMISSED and DENIED in all other respects with leave to renew. That defendants' 26 Cross Motion for Partial Summary Judgment is DENIED. Signed by Chief Judge Gary L. Sharpe on 6/5/2013. (jel, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
________________________________
BYRNE & STORM, P.C.,
Plaintiff,

1:12-cv-716
(GLS/RFT)

v.
ROY HANDEL et al.,
Defendants.
________________________________
APPEARANCES:
OF COUNSEL:
FOR THE PLAINTIFF:
Ganz, Wolkenbreit Law Firm
1 Columbia Circle
Albany, NY 12203
FOR THE DEFENDANTS:
Office of Michael P. Delaney
465 New Karner Road
Albany, NY 12205

CONOR E. BROWNELL, ESQ.

MICHAEL P. DELANEY, ESQ.

Gary L. Sharpe
Chief Judge
MEMORANDUM-DECISION AND ORDER
I. Introduction
Plaintiff Byrne & Storm, P.C. commenced this diversity action
asserting claims of breach of contract and account stated against
defendants Roy Handel (hereinafter “Handel”) and Weldon House, Inc.

related to its legal representation of them. (See Compl., Dkt. No. 1.)
Pending before the court is Byrne & Storm’s motion for summary judgment
on its claims and defendants’ counterclaims, and defendants’ cross motion
for partial summary judgment, which seeks dismissal of Byrne & Storm’s
claims as against Handel. (See Dkt. Nos. 19, 26.) For the reasons that
follow, Byrne & Storm’s motion is granted as to defendants’ counterclaim of
legal malpractice and denied in all other respects with leave to renew, and
defendants’ cross motion is denied.
II. Background
A.

Facts1
Byrne & Storm is a law firm with its only office located in Connecticut.

(See Pl.’s Statement of Material Facts (SMF) ¶ 1, Dkt. No. 19, Attach. 8.)

1

Unless otherwise noted, the facts are undisputed. The court also
observes that defendants failed to specifically admit or deny each
numbered paragraph contained in Byrne & Storm’s Statement of Material
Facts as required by N.D.N.Y. L.R. 7.1(a)(3). (See Defs.’ Resp. to Pl.’s
Statement of Material Facts (SMF), Dkt. No. 25.) As that rule directs,
“[t]he [c]ourt shall deem admitted any properly supported facts set forth in
the Statement of Material Facts that the opposing party does not
specifically controvert.” N.Y.N.D. L.R. 7.1(a)(3). Moreover, Byrne &
Storm failed to file any response to defendants’ Statement of Material
Facts in support of their cross motion. (See Defs.’ SMF, Dkt. No. 26,
Attach. 2). Accordingly, the court deems admitted the properly supported
facts asserted in both Statements of Material Facts.
2

On September 1, 2009, attorney James Byrne, of Byrne & Storm, sent to
Handel a letter of engagement regarding “[t]he Weldon House [p]roperty.”
(Dkt. No. 1, Attach. 1; see Pl.’s SMF ¶ 2.) The engagement letter, which
was later signed by Handel—who is not an officer or employee of Weldon
House, nor is he the owner of the property where Weldon House is
located, (see Defs.’ SMF ¶¶ 2-3, Dkt. No. 26, Attach. 2)—indicates that
Handel requested that Byrne & Storm represent him “with respect to
reviewing and rendering advice with respect to the underlying facts and
documentation involving [his] attempts to obtain and operate a motocross
facility on” the Weldon House property. (Dkt. No. 1, Attach. 1 at 1.)2 Under
the agreement, Byrne, “the primary attorney responsible for the file,” billed
his time at a rate of $350 per hour. (Id. at 1; see Pl.’s SMF ¶ 3.) The letter
of engagement also provides that a monthly interest rate of 1.5% would be
added to bills not timely paid, and Byrne & Storm would be entitled to
recover attorney’s fees associated with any collection efforts. (See Pl.’s
SMF ¶ 4.) “[T]he parties agreed that [Byrne & Storm] would receive a
$5,000[] retainer at the outset of the representation,” which was later paid

2

Weldon House is a New York corporation with a place of business
in East Durham, New York. (Compare Compl. ¶ 4, with Dkt. No. 7 ¶ 1.)
3

by a check drawn from a Weldon House bank account and signed by
Handel’s wife and principal/owner of Weldon House, Patricia Handel. (Pl.’s
SMF ¶ 5; see id. ¶¶ 6, 8.) Once the retainer was paid, Handel told Byrne
that Patricia Handel “was to be the principal contact.” (Id. ¶ 7.)
In June 2010, Byrne drafted a second letter, this time addressing it to
both Handel and Weldon House. (See Dkt. No. 1, Attach. 2.) The second
letter, which referenced the September 2009 letter, reduced the hourly
billable rate to $300 per hour effective June 1, 2010, but, otherwise, left in
place the terms of the September 2009 letter of engagement. (See id. at
1.) The June 2010 letter was signed by Handel and Patricia Handel. (See
id. at 2.)
Byrne & Storm performed legal services related to the Weldon House
property; specifically, it appeared as co-counsel in a state court action, and
sent bills to the Handel residence, none of which were returned as
undeliverable. (See Pl.’s SMF ¶¶ 10, 11, 14-15.) In July 2010, the
motocross litigation settled “on basically the terms that [d]efendants had
initially wanted.” (Id. ¶ 17.) Defendants made several partial payments to
Byrne & Storm after paying the initial retainer of $5,000 in September
2009, including an additional $5,000 in February 2010, $2,500 in May
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2010, $16,395 in July 2010, $5,000 in November 2010, and $5,000 in
February 2011. (See id. ¶ 19; Dkt. No. 19, Attach. 3 at 36.)
B.

Procedural History
Byrne & Storm commenced this action in April 2012, alleging that it

was owed an outstanding balance of $261,929.66 plus interest as set forth
above. (See Compl.) Defendants answered, asserted several affirmative
defenses, and asserted five counterclaims. (See Dkt. No. 7.) Those
counterclaims are for: “fraud and overbilling”; legal malpractice; res ipsa
loquitur; breach of fiduciary duty; and breach of contract. (Id. ¶¶ 19-28.)3
Despite a June 2013 discovery deadline, (see Dkt. No. 18), Byrne & Storm
moved for summary judgment in January 2013, (see Dkt. No. 19), and, in
March 2013, defendants cross-moved as outlined above, (see Dkt. No.
26).
III. Standard of Review
The standard of review pursuant to Fed. R. Civ. P. 56 is well
established and will not be repeated here. For a full discussion of the

3

Defendants have withdrawn their affirmative defenses of lack of
privity of contract and lack of subject matter jurisdiction, and have similarly
withdrawn their counterclaim of res ipsa loquitur. (See Dkt. No. 26,
Attach. 3 at 7, 14.)
5

standard, the court refers the parties to its decision in Wagner v. Swarts,
827 F. Supp. 2d 85, 92 (N.D.N.Y. 2011).
IV. Discussion4
Byrne & Storm argues that it is entitled to judgment as to its claim of
account stated because it has shown a prima facie case, and defendants
have failed to raise a “legally sufficient objection” in their answer. (See
Dkt. No. 19, Attach 7 at 4-7.) As for its breach of contract claim, Byrne &
Storm makes the same assertion. (See id. at 7-11.) As a threshold issue,
defendants argue that, given the extremely limited discovery to date, Byrne
& Storm’s motion is premature and should be denied pursuant to Fed. R.
Civ. P. 56(d). (See Dkt. No. 26, Attach. 1 at 2-3.) To this Byrne & Storm
responds that: because defendants identify no specific facts that would
demonstrate the existence of a triable issue, the motion is not premature
for want of discovery; defendants’ failure to object to the several bills they

4

While neither party specifically addresses the question of what
substantive law the court should apply in this diversity action, both
implicitly rely on New York law as evidenced by their citation to decisions
primarily from the courts of that state and their reference to the decisions
of federal courts applying New York law. (See, e.g., Dkt. No. 19, Attach. 7
at ii-iv; Dkt. No. 26, Attach. 1 at ii.) In light of the foregoing, the court
applies New York law. See Konikoff v. Prudential Ins. Co. of Am., 234
F.3d 92, 98 (2d Cir. 2000).
6

received precludes them from arguing now that they were overbilled; and, if
the court finds the motion premature, Byrne & Storm asks for a
continuance as opposed to outright denial of its motion. (See Dkt. No. 29,
Attach. 1 at 1-3.)
Defendants contend next that summary judgment is inappropriate as
to Byrne & Storm’s claim of account stated because there is proof of
“mistake or fraud” as alleged in the affidavits of Handel and Patricia
Handel. (Dkt. No. 26, Attach. 1 at 3-4.) Byrne & Storm’s breach of
contract claim is infirm, argues defendants, because they were
overbilled—which also supports their counterclaims for breach of contract
and breach of fiduciary duty—and Byrne & Storm committed legal
malpractice when Byrne told defendants “that he was going to be
successful in his counter-suits and was so confident in his ability to win
[them] that he told [defendants] not even to pay attention to the legal bill
because it was irrelevant as he was going to recover that money in the
counter-suits.” (Id. at 4-6.) While they also recognize that they may have
“waived [the] portion of their malpractice claim [that related to their reliance
on Byrne’s alleged representations] by settling the [underlying] lawsuit,”
defendants contend, without any supporting authority, that overbilling or
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fraudulently billing them “in and of itself would constitute an act of legal
malpractice.” (Id. at 6.) Finally, in support of their partial summary
judgment motion, defendants assert that all claims against Handel should
be dismissed because “[i]t was not the intent of either [Byrne & Storm] or
the defendant to bind . . . Handel personally or as guarantor on behalf of
the Weldon House.” (Id. at 6.)
A.

Account Stated
“An account stated is an agreement between parties to an account

based upon prior transactions between them with respect to the
correctness of the account items and balance due.” Citibank (S.D.), N.A.
v. Brown-Serulovic, 97 A.D.3d 522, 523 (2d Dep’t 2012) (internal quotation
marks and citations omitted). Such “‘[a]n agreement may be implied where
a defendant retains bills without objecting to them within a reasonable
period of time, or makes partial payment on the account.’” Id. (quoting Am.
Express Centurion Bank v. Cutler, 81 A.D.3d 761, 762 (2d Dep’t 2011)).
An account stated “is not conclusive upon either party, but is simply prima
facie presumptively correct, and may be impeached for any error induced
by fraud or mistake.” Samson v. Freedman, 7 N.E. 419, 421 (N.Y. 1886).
Thus, while such a claim may be attacked by the defendant for fraud,
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mistake, or error, see Lockwood v. Thorne, 11 N.Y. 170, 170 (1854), “‘bald
conclusory allegations of fraud, mistake, and other equitable
considerations are insufficient to defeat a motion for summary judgment’
on an account stated,” Cohen Tauber Spievak & Wagner, LLP v. Alnwick,
33 A.D.3d 562, 562 (1st Dep’t 2006) (quoting Liddle, O’Connor, Finkelstein
& Robinson v. Koppelman, 215 A.D.2d 204 (1st Dep’t 1995)).
Here, Byrne & Storm has shown a prima facie case of account
stated. See Morrison Cohen Singer & Weinstein, LLP v. Waters, 13
A.D.3d 51, 52 (1st Dep’t 2004). At a minimum, that showing is supported
by defendants’ partial payments on the account. (See Pl.’s SMF ¶ 19.) To
avoid summary judgment, defendants must show, by more than
speculation or conjecture, that the account—totaling nearly $262,000—is
erroneous because of mistake or fraud. See Cohen, 33 A.D.3d at 562.
Defendants attempt to make such a showing by claiming that Byrne
overbilled them, with a specific example related to his participation in
certain depositions, and that their failure to timely object to the account
was a result of their heeding Byrne’s assurances and following his advice
to ignore the growing bills. (See Dkt. No. 26, Attach. 3 at 3-4, 10, 12-14.)
While these conclusory assertions, which are disputed by Byrne, (see Dkt.
9

No. 19, Attach. 2 ¶¶ 30, 34, 36), do not suffice to defeat summary
judgment for a prima face claim of account stated, the court agrees that,
given the limited discovery to date, Byrne & Storm’s motion is premature
on this claim and defendants should be allowed further discovery.
Defendants are in an untenable position of having to make a significant
showing of fraud or mistake when the information that would shed light on
that inquiry is in possession of Byrne & Storm.5 Accordingly, the motion is
denied, with leave to renew, to allow for further discovery. See Fed. R.
Civ. P. 56(d).6
B.

Breach of Contract
Under New York law, “[t]he elements of a cause of action for breach

of contract are (1) formation of a contract between plaintiff and defendant;
(2) performance by plaintiff; (3) defendant’s failure to perform; and (4)
resulting damage.” Clearmont Prop., LLC v. Eisner, 58 A.D.3d 1052, 1055
(3d Dep’t 2009) (internal quotation marks and citation omitted). As
5

The court also appreciates that former Byrne & Storm attorney
Jacob Studenroth, who performed work that was billed to defendants, is
no longer an employee of the firm. (See Dkt. No. 29 ¶ 4.) Studenroth,
however, may also possess relevant information.
6

Any ensuing discovery-related matters are to be raised with
Magistrate Judge Treece.
10

relevant to defendants’ affirmative defenses of overbilling, (see Dkt. No. 7
¶¶ 15-16), where the contract at issue is one between attorney and client,
“[o]verbilling and padding of costs can constitute a breach of contract” on
the part of the attorney. O’Connor v. Blodnick, Abramowitz & Blodnick, 295
A.D.2d 586, 587 (2d Dep’t 2002); see Nason v. Fisher, 36 A.D.3d 486, 487
(1st Dep’t 2007).
Here, there is no dispute that the parties entered into a contract,
Byrne & Storm rendered legal services, and defendants have failed to pay
the outstanding balance of the bill for those services. (See Dkt. No. 1,
Attachs. 1, 2; Pl.’s SMF ¶ 21.) The unresolved issue is whether the bill
accurately reflects the work performed by Byrne & Storm on defendants’
behalf. Therefore, Byrne & Storm’s claim—and defendants’ counterclaim,
as explained below—turn on whether defendants were overbilled by Byrne
& Storm. For the same reasons as above, summary judgment is
premature and further discovery is warranted.
C.

Counterclaims
Defendants’ counterclaims of fraud and overbilling, breach of

fiduciary duty, and breach of contract all rely on the single factual
allegation that Byrne & Storm inaccurately billed them for legal services.
11

(See Dkt. No. 7 ¶¶ 19-20, 27-28.7) As explained above, defendants have
not yet had the opportunity for discovery on that issue, which gives the
court reason to deny Byrne & Storm’s motion with leave to renew.8
The remaining counterclaim, for legal malpractice, requires further
analysis. That counterclaim is premised on defendants’ assertion that: (1)
assurances were made by Byrne regarding the likely success of
defendants’ counter suit in the underlying state court action, which caused
defendants to continue with Byrne & Storm as counsel when they
otherwise would not have, given the considerable bills being generated by
the firm; and (2) Byrne & Storm overbilled or “churn[ed] the file,” which was
by itself legal malpractice. (Id. ¶ 25; see id. ¶¶ 21-25.) As explained
below, Byrne & Storm is entitled to judgment on defendants’ legal
malpractice counterclaim.
“To state a cause of action to recover damages for legal malpractice,

7

The court notes that two paragraphs in defendants’ Answer are
numbered twenty-eight. (See generally Dkt. No. 7 at 5-6.)
8

Notably, these counterclaims may be but different theories of a
single claim of relief, which could, at most, result in one recovery. See
Indu Craft, Inc. v. Bank of Baroda, 47 F.3d 490, 497 (2d Cir. 1995) (“A
[party] seeking compensation for the same injury under different legal
theories is of course only entitled on one recovery.”)
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a [client] must allege: (1) that the attorney failed to exercise the ordinary
reasonable skill and knowledge commonly possessed by a member of the
legal profession, and (2) that the attorney’s breach of the duty proximately
caused the [client] actual and ascertainable damages.” Keness v.
Feldman, Kramer & Monaco, P.C., 105 A.D.3d 812 (2d Dep’t 2013)
(internal quotations marks and citation omitted). The attorney’s negligence
must be the “but for” cause of any damage to the client. M & R Ginsburg,
LLC v. Segal, Goldman, Mazzotta & Siegel, P.C., 90 A.D.3d 1208, 1209
(3d Dep’t 2011). As relevant here, “[a] claim for legal malpractice is viable,
despite settlement of the underlying action, if it is alleged that settlement of
the action was effectively compelled by the mistakes of counsel.” Keness,
105 A.D.3d at 812 (internal quotation marks and citation omitted).
Here, the viability of a claim of negligence on the part of Byrne &
Storm regarding Byrne’s assurances about a counter suit was extinguished
by defendants’ settlement of the underlying action. (See Pl.’s SMF ¶ 17.)
Indeed, defendants make no allegation that the settlement was compelled
by Byrne’s negligence nor do they take issue with the resolution of their
litigation “on basically the terms that [they] had initially wanted.” (Id.) As
such, defendants cannot demonstrate that their claimed damages with
13

respect to the first factual allegation—an obligation to pay the bill that
Byrne told them would be covered by the fruits of “counter suits”—were
proximately caused by Byrne. (Dkt. No. 7 ¶ 23; see id. ¶¶ 21-24.) Turning
to the second factual assertion in support of their legal malpractice
counterclaim, (see id. ¶ 25), defendants have provided no support for the
proposition that overbilling by itself “constitute[s] an act of legal
malpractice,” (Dkt. No. 26, Attach. 1 at 6), and the court is aware of none.
In any event, defendants’ remaining counterclaims sufficiently cover the
common allegation of overbilling. Accordingly, Byrne & Storm is entitled to
judgment on defendants’ counterclaim of legal malpractice.
D.

Defendants’ Cross Motion
Finally, the court denies defendants’ cross motion for partial

summary judgment. (See Dkt. No. 26.) As shown by the September 2009
and June 2010 letters, it is unclear whether Handel signed in his individual
capacity or on behalf of Weldon House. (See Dkt. No. 1, Attachs. 1, 2.) In
particular, the first letter references Handel’s “request[] that [Byrne &
Storm] represent [him] with respect to . . . [his] attempts to obtain and
operate a motocross facility on the [Weldon House] property,” is signed
only by him without any agent designation, and is addressed only to him.
14

(Dkt. No. 1, Attach. 1.) The second letter, which is addressed to both
Handel and Weldon House, includes
“Agreed to:
Weldon House, Inc.
By:”
with two signature lines following it that were apparently executed by
Patricia Handel and Handel; it also contains language “that all of us shall
be bound by the terms of the Letter.” (Dkt. No. 1, Attach. 2.) Moreover,
Handel’s assertion that “neither [he] nor Mr. Byrne intended to bind [him]
personally to the retainer agreements,” (Dkt. No. 26, Attach. 3 at 9), is
disputed by Byrne, who contends that he “always intended for both . . .
Handel and . . . Weldon House to be bound by the terms of the retainer
agreement and letter agreement,” (Dkt. No. 29 ¶ 2(vi)). These obvious
issues of fact preclude summary judgment. Cf. Klapper v. Integrated Agric.
Mgmt. Co., 149 A.D.2d 765, 766-67 (3d Dep’t 1989).
V. Conclusion
WHEREFORE, for the foregoing reasons, it is hereby
ORDERED that Byrne & Storm’s motion for summary judgment (Dkt.
No. 19) is GRANTED IN PART and DENIED IN PART as follows:
GRANTED as to defendants’ counterclaim of legal malpractice,
15

which counterclaim is DISMISSED; and
DENIED in all other respects with leave to renew; and it is
further
ORDERED that defendants’ cross motion for partial summary
judgment (Dkt. No. 26) is DENIED; and it is further
ORDERED that the Clerk provide a copy of this MemorandumDecision and Order to the parties.
IT IS SO ORDERED.
June 5, 2013
Albany, New York

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