PAMELA K. CHEN, 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.
M.E.S., Inc. ("MES") is a New York corporation. (Def. 56.1
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; 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.)
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 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.
WTH&F claims that it attended meetings regarding the three COE projects on behalf of Safeco only. (Def. 56.1 ¶ 23.)
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 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.
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.
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).
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).
Courts in this jurisdiction consider six factors to determine whether an attorney-client relationship exists, though no one factor is dispositive:
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.
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 relationship existed between Plaintiffs and WTH&F. Plaintiffs cite no authority for this contorted conclusion, nor has the Court found any.
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 affidavit
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.
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. Reply
Plaintiffs claim that they reasonably believed that they had an attorney-client relationship with WTH&F between March 2008 and April 2009.
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.
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 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.").
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.
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 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.
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.
For the reasons discussed herein, Defendants' motion for summary judgment is granted in its entirety.
SO ORDERED:
