Tabberone is pronounced tab ber won
not tay ber own
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Tabberone is pronounced tab ber won |
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United States District Court, S.D. New York. David ROGATH, Plaintiff,v. John B. KOEGEL, Defendant.
No. 96 CIV. 8729(DAB).
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MEMORANDUM OPINION AND ORDER
BATTS, District J. Plaintiff David Rogath ("Plaintiff") brings this suit against Defendant John B. Koegel ("Defendant") asserting claims of conversion separately and as part of a conspiracy, fraud and deceit, breach of fiduciary duty, breach of Judiciary Law § 487, unjust enrichment, attorney's fees, and legal malpractice. Defendant moves to dismiss the Complaint pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure. For the following reasons, Defendant's motion is granted in its entirety. I. BACKGROUND This case arises from Defendant's role as an attorney in another action (the "Siebenmann Action") before this Court. [FN1]A. The Siebenmann Action In July 1993, Werner E.R. Siebenmann ("Siebenmann") sold a painting, thought to be a Francis Bacon original (the "Painting"), to Plaintiff for $570,000 with warranties that (a) the Painting was an authentic original oil painting by the renowned artist Francis Bacon; (b) Siebenmann was the sole and absolute owner of the Painting; and (c) Siebenmann acquired title to the Painting as described in a copy of the Statement of Provenance. (Compl.¶ 5, ¶ 7.) In late October 1993, Plaintiff sold the Painting to Acquavella Contemporary Art, Inc. ("Acquavella") for $950,000. (Compl. ¶ 10 .) Shortly thereafter, Acquavella returned the Painting on the grounds that it was a forgery and Plaintiff refunded $950,000 to Acquavella. (Id. at ¶¶ 11-12.) Immediately thereafter, Plaintiff sued Siebenmann for breach of contract, breach of warranty, and fraud. (Compl.¶ 13.) On September 30, 1996, this Court granted partial summary judgment on the breach of warranty claims, awarding $950,000 in damages to Plaintiff. (Compl.¶ 18, ¶ 21); Rogath v. Siebenmann, 941 F.Supp. 416, 425 (S.D.N.Y.1996). Siebenmann appealed, arguing that Plaintiff "was fully aware when he bought the painting that questions of authenticity and provenance had already been raised regarding the Painting", and therefore Plaintiff had waived any claims for breach of warranty. Rogath v. Siebenmann, 129 F.3d 261, 263, 266 (2d Cir.1997). On November 10, 1997, the Second Circuit vacated and remanded the Siebenmann Action, finding that "genuine issues of fact persist" such that summary judgment was inappropriate on the issue of whether Plaintiff had waived any claims for breach of warranty. Id. at 266. B. The Koegel Action Siebenmann retained John B. Koegel ("Defendant") to represent him in the Siebenmann Action. (Compl.¶ 14.) In November or December of 1993, Siebenmann paid $10,000 to Defendant for legal services and disbursements and deposited $241,856.44 (the "Funds") in Defendant's escrow account for the same purpose. [FN2] (Compl.¶¶ 15-17.) Defendant agreed to provide ten (10) days' written notice to Plaintiff's attorney prior to termination of the escrow. (Compl.¶ 17.) After this Court's decision in the Siebenmann Action, granting partial summary judgment and awarding damages of $950,000 to Plaintiff, Defendant notified Plaintiff's attorney that the escrow would be terminated in ten days. (Compl.¶ 20.) The Second Circuit ordered the Funds to be deposited with Clerk of the Southern District of New York, pending appeal in the Siebenmann Action. (Compl. ¶ 23.) Nearly three years after the Funds were first deposited in Defendant's escrow account, Defendant deposited $170,642.74 with the Clerk of the Southern District of New York. (Compl.¶ 24.) The sum deposited with the Clerk of the Southern District of New York represents the amount of the Funds remaining in Defendant's escrow account on October 28, 1996. (Compl.¶ 24.) Plaintiff alleges that the initial payment of $10,000 and initial deposit of $241,856.44 were part of the money that Plaintiff paid to Siebenmann to purchase the Painting. (Compl.¶¶ 15-16.) Since the initial payment and deposit were derived from the proceeds of the sale, Plaintiff claims that Defendant used $81,213.70 [FN3] of Plaintiff's money to pay for legal services rendered in the Siebenmann Action. (Compl.¶¶ 26-27.) Plaintiff asserts the following claims against Defendant: conversion, (Compl.¶¶ 25-32); unjust enrichment (Compl.¶¶ 42-44); breach of fiduciary duty (Compl.¶¶ 36-39); assorted legal malpractice claims, [FN4] (Com pl.¶¶ 40-41, ¶¶ 50-55.); attorney's fees (Compl.¶¶ 45-49); and fraud. (Compl.¶¶ 33-35.) II. DISCUSSION On a 12(b)(6) motion, the Court must accept as true the factual allegations in the complaint, and view the complaint in the light most favorable to the non-moving party. Bolt Elec., Inc. v. City of New York, 53 F.3d 465, 469 (2d Cir.1995). Courts grant a 12(b)(6) motion only if " 'it appears beyond doubt that the Plaintiff can prove no set of facts in support of her claim which entitle her to relief." ' Walker v. City of New York, 974 F.2d 293, 298 (2d Cir.1992) (quoting Ricciuti v. New York City Transit Auth., 941 F.2d 119 (2d Cir.1991) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957))). Accepting the factual allegations in the Complaint as true and drawing all inferences in favor of Plaintiff, the Court finds that Plaintiff has failed to state a claim against Defendant on all claims.A. Conversion Claims Plaintiff's first and second claims charge Defendant with conversion. Plaintiff alleges that Defendant used funds in Defendant's escrow account (the "Funds") which were a portion of the proceeds that Defendant's client, Siebenmann, received from the sale of the Painting. (Compl.¶ 16.) Conversion is defined as the "unauthorized assumption and exercise of the right of ownership over goods belonging to another to the exclusion of the owner's rights." Vigilant Ins. Co. of America v. El Paso Housing Auth., 87 N.Y.2d 36, 44, 637 N.Y.S.2d 342, 347, 660 N.E.2d 1121 (N.Y.1995) (citing Employers' Fire Ins. Co. v. Cotten, 245 N.Y. 102, 105, 156 N.E. 629, 630 (N.Y.1927); Industrial & Gen. Trust v. Tod, 170 N.Y. 233, 245, 63 N.E. 285, 288 (N.Y.1902)) (emphasis added). Essential to Plaintiff's claim of conversion is the question of whether the Funds in Defendant's escrow account belong to Plaintiff. "[A]n Article III court cannot entertain a claim which is based upon contingent future events that may not occur as anticipated, or indeed may not occur at all." Thomas v. City of New York, 143 F.3d 31, 34 (2d Cir.1998) (citations and internal quotations omitted). A court may raise the issue of ripeness and justiciability sua sponte. Id. In light of the Second Circuit's decision in the Siebenmann Action, vacating and remanding this Court's grant of partial summary judgment and damages to Plaintiff, it is clear that ownership of the Funds is again at issue. Rogath v. Siebenmann, 129 F.3d 261, 267 (2d Cir.1997). Rogath's possessory interest, if any, in the Funds depends on whether Rogath prevails at trial in the Siebenmann Action. Thus, Plaintiff's claims are not justiciable because they are not ripe for decision. See Auerbach v. Board of Education, 136 F.3d 104, 108-109 (2d Cir.1998) ( "When the events alleged in a plaintiff's cause of action have not yet occurred, a federal court is precluded from exercising subject matter jurisdiction because a real case or controversy does not exist for purposes of Article III"). Even if the Siebenmann Action were to be decided in Plaintiff's favor, however, the conversion claims must be dismissed because Plaintiff has failed to allege that he was entitled, at any time, to immediate possession of any portion of the Funds deposited with Defendant. [FN5] While New York law does recognize an action for conversion of money, "[a]n action for conversion of money is insufficient as a matter of law unless it is alleged that the money converted was in specific tangible funds of which claimant was the owner and entitled to immediate possession. An action of conversion does not lie to enforce a mere obligation to pay money." Ehrlich v. Howe, 848 F.Supp. 482, 492 (S.D.N.Y.1994). Plaintiff's claim to the Funds is, at best, based on a tenuous obligation to pay money. Plaintiff alleges that he has and always has had "title" to the money that was paid to Siebenmann, based on this Court's decision in the Siebenmann Action that Siebenmann had breached three warranties in connection with sale of the Painting. (Pl.'s Opp'n Mem. at 8-10.) Plaintiff alleges that "Siebenmann was in the position of a thief [of the Painting]." (Pl.'s Opp'n Mem. at 9.) By Plaintiff's reasoning, Siebenmann, as a "thief", could not transfer title of the Painting to Plaintiff, and therefore Plaintiff could not have transferred title to the money to Siebenmann. (Id. at 10.) Plaintiff grossly mischaracterizes the Court's previous decision. In the Siebenmann Action, the Court found that Siebenmann "was acting on behalf of the owner and was not the sole and absolute owner of the Painting." 941 F.Supp. at 424 (emphases added). This Court never determined that "title" to the purchase money of the Painting remained in Plaintiff's name; rather, the Court awarded damages of $950,000 for a breach of warranty. 941 F.Supp. at 425. Plaintiff was not entitled to $950,000 or any other sum from Siebenmann at the time he paid $570,000 to Siebenmann for the Painting, nor has Plaintiff alleged that he was entitled to immediate possession, from anyone, of any portion, of the $570,000 after it was paid to Siebenmann. Plaintiff might have had a claim to the Funds in Defendant's possession only if Siebenmann did not satisfy the judgment. Thus, even if Plaintiff were able to show that Plaintiff was entitled to money from Siebenmann, [FN6] the Court questions how Defendant could have anything more than "a mere obligation to pay money." Ehrlich, 848 F.Supp. at 492. Plaintiff's conversion claims also fail because Plaintiff cannot, under any set of facts, show that the Funds constitute any specifically identifiable money that would be the proper subject of a conversion action. "Money may be the subject of a conversion action if it is specifically identifiable." Hutton v. Klabal, 726 F.Supp. 67, 72 (S.D.N.Y.1989). Money need not be segregated in order to be specifically identifiable, so long as "there is an obligation to return or otherwise treat in a particular manner the specific money in question." LoPresti v. Terwilliger, 126 F.3d 34, 41 (2d Cir.1997). See also Columbia Marine Serv., Inc. v. Reffet Ltd., 861 F.2d 18, 23 (2d Cir.1988) (affirming dismissal of conversion claim against third party because plaintiff could not, under facts pled, show ownership or possessory rights in moneys paid by alleged debtor to third party out of debtor's general funds). Plaintiff argues that "[i]t is precisely because the ... Funds were deposited in Koegel's attorney escrow account, and not some other general commingled funds account, that they are 'specifically identifiable' so as to support a conversion claim." (Pl.'s Opp'n Mem. at 11.) Plaintiff, however, neglects to address the problem of the numerous general commingled funds accounts through which the money passed before the money found its way into Defendant's escrow account. [FN7] Indeed, Plaintiff's own complaint shows that the funds traveled a long and winding road before they became "the Funds": Plaintiff delivered $570,000 in the form of a certified check drawn to the order of Hudson Shipping in July 1993, (Compl.¶ 6); Hudson Shipping deposited Plaintiff's check and then disbursed the money "as instructed by Siebenmann", (Compl.¶ 8); [FN8] "between July 20, 1993 and September 30, 1993" portions of the purchase price were "wired or otherwise transferred to Bruce Jenkins and/or Mary Kate Jenkins, or to others as instructed by Bruce Jenkins", (Compl. ¶ 9); in "November or December 1993" Siebenmann received $10,000 back from Bruce Jenkins, which Siebenmann then paid to Defendant, (Compl.¶ 15); around the same time, Siebenmann "voluntarily" deposited $241,856.44 in Defendant's escrow account. (Compl.¶¶ 15-16). In short, from July 1993 through November 1993, $570,000 traveled from Plaintiff's account through two or more intermediaries' general commingled funds accounts before $241,856.44 made its way to Defendant's escrow account. Ten thousand dollars ($10,000) took a more circuitous route, lingering for two to four months with Bruce and Mary Kate Jenkins before returning to Siebenmann and then being forwarded by Siebenmann to Defendant. These allegations, if proved, would not render the Funds sufficiently identifiable to support a conversion claim; instead, Plaintiff's allegations show the opposite to be true. Thus, for all of the foregoing reasons, Plaintiff's conversion claims must be dismissed. [FN9] Likewise, Plaintiff contends in his seventh claim that Defendant's 'conversion' caused Plaintiff to incur legal fees and expenses; however, since Plaintiff has not stated a claim for conversion, Plaintiff's claim for legal fees as a result of that conversion must be dismissed. B. Fiduciary Duty Claims In his fourth claim, Plaintiff alleges that Defendant had a fiduciary duty to Plaintiff and that it was breached when Defendant used $81,213.70 to pay for legal fees incurred by Siebenmann in the Siebenmann Action. (Compl.¶¶ 36- 39.) Plaintiff alleges that Defendant's fiduciary duty arose when Defendant received the Funds "as trustee for the party who would prevail party [sic] in the [Siebenmann] Action." (Compl.¶ 37) However, Plaintiff also alleges that the Funds were deposited with Defendant "to pay [Defendant's] ... legal fees for legal services rendered or to be rendered and disbursements incurred or to be incurred in the defense of the [Siebenmann] Action." (Compl.¶ 17.) Under New York law, a fiduciary duty arises when the parties "agree to and accept the responsibilities that flow from ... a contractual fiduciary bond." Northeast General Corp. v. Wellington Advertising, Inc., 82 N.Y.2d 158, 160, 604 N.Y.S.2d 1, 2, 624 N.E.2d 129 (N.Y.1993). Courts will not impute a fiduciary relationship unless the parties' conduct and agreements indicate that the parties intended to create a fiduciary relationship. Id. at 162, 604 N.Y.S.2d at 3, 624 N.E.2d 129. Plaintiff has not alleged that an attorney-client relationship existed between Plaintiff and Defendant; indeed, Plaintiff has not alleged that a business relationship of any kind has ever existed between Plaintiff and Defendant. Plaintiff does plead that Defendant offered, "on several occasions", to settle the Siebenmann Action for the amount remaining in Defendant's escrow account, (Compl.¶¶ 30-31); Plaintiff further asserts that "Siebenmann avowedly wanted to return the purchase price to [Plaintiff] ... to avoid litigation." These facts, if true, do not support a fiduciary relationship between Plaintiff and Defendant. Instead, these facts, if true, tend to show the opposite: that Defendant's duty was to represent Plaintiff's adversary in the Siebenmann Action. Thus, it is clear to the Court that Plaintiff and Defendant never had, and never intended to create, a fiduciary relationship. Accordingly, Plaintiff's fourth claim for breach of fiduciary duty is dismissed. [FN10] C. Fraud Claim In his third claim, Plaintiff alleges that Koegel and Siebenmann planned and schemed to deprive Rogath of $81,213.70. (Compl.¶ 34.) Rule 9(b) provides that "[i]n all averments of fraud and mistake, the circumstances constituting fraud or mistake shall be stated with particularity." Fed.R.Civ.P. 9(b). The elements of a prima facie case of fraud are: 1) material false representation by defendant, 2) intent to defraud by the false representation, 3) reasonable reliance on the false representation, and 4) damages. Bridgestone/Firestone, Inc. v. Recovery Credit Svcs., Inc., 98 F.3d 13, 19 (2d Cir.1996). To satisfy the particularity requirement of Rule 9(b), the complaint must specify the time, place, speaker, and content of the alleged statements and explain why the statements were fraudulent. Acito v. IMCERA Group, Inc., 47 F.3d 47, 52 (2d Cir.1995). "Mere conclusory allegations of fraudulent or deceptive behavior are insufficient to satisfy Rule 9(b)." Carlucci v. Owens-Corning Fiberglas Corp., 646 F.Supp. 1486, 1489 (E.D.N.Y.1986). Plaintiff avers only that Defendant planned and schemed with Siebenmann to deprive Plaintiff of his property. (Compl.¶ 34.) Plaintiff has not identified a single false statement or misrepresentation or omission made by Koegel at any time. Plaintiff has made no allegations of intent, other than stating that "Koegel and Siebenmann agreed and colluded to deposit the ... [Funds] in Koegel's escrow account as part of a plan and scheme to extort from Rogath, for the amount of the [Funds] ... the settlement of his claims against Siebenmann in a much larger amount." (Compl.¶ 29.) Reading Plaintiff's complaint in the light most favorable to Plaintiff, Defendant's fraud appears to be based upon deposit of the Funds in Defendant's escrow account and an attempt to coerce Plaintiff into settling the Siebenmann Action for an amount lower than the true value of Plaintiff's claims. Even assuming, for the purposes of this motion only, that a deposit of funds into a bank account constitutes a material false representation to a third party, Plaintiff did not rely in any way upon such "representation": Plaintiff did not settle the Siebenmann Action and the Siebenmann Action is currently pending before this Court. [FN11] Rogath v. Siebenmann, 129 F.3d 261, 267 (2d Cir.1997) (vacating and remanding prior award of summary judgment for Plaintiff). Defendant represented Siebenmann against Rogath in the Siebenmann Action; Plaintiff has only alleged facts which would tend to show that Plaintiff was not entitled to rely (and in fact did not rely) on any of Defendant's representations. Thus, Plaintiff's third claim is dismissed. D. Leave to Replead Rule 15(a) of the Federal Rules of Civil Procedure provides that permission to amend a pleading "shall be freely given when justice so requires." Fed.R.Civ.P. 15(a). "[I]t is the usual practice upon granting a motion to dismiss to allow leave to replead." Cohen v. Citibank, N.A., No. 95 Civ. 4826, 1997 WL 88378, at *2 (S.D.N.Y. Feb.28, 1997); accord Intermetals Corp. v. M/V Arctic Confidence, No. 92 Civ. 1856, 1993 WL 312903, at *1 (S.D.N.Y. Aug. 12, 1993). Absent a showing of undue delay, bad faith, or dilatory motive on the part of the movant, undue prejudice to the opposing party, or the futility of the amendment, a plaintiff should be granted leave to replead. See Protter v. Nathan's Famous Sys., Inc. . 904 F.Supp. 101, 111 (E.D.N.Y.1995) (citing Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962)). In this case, the Court finds that the plaintiff could not, under any circumstances, sufficiently allege his claims. See State Teachers Retirement Bd. v. Fluor Corp., 654 F.2d 843, 856 (2d Cir.1981) (leave to amend may be denied if amendment would be futile); Protter, 904 F.Supp. at 11 (same). Plaintiff has pled facts which, as a matter of law, cannot support a conversion claim for money (First and Second Claims). Therefore, Plaintiff's unjust enrichment claim (Sixth Claim) and claim for attorney's fees (Seventh Claim), predicated on conversion, must also be dismissed. Plaintiff's breach of fiduciary duty (Fourth Claim) and assorted legal malpractice claims [FN12] are also dismissed, because Plaintiff has not pled and cannot plead that any fiduciary duty or attorney-client relationship existed between Plaintiff and Defendant. Finally, Plaintiff's fraud claim (Third Claim) is dismissed because Plaintiff has not pled any of the elements of a prima facie fraud claim. Instead, Plaintiff has pled facts which, if true, would show that Plaintiff was not entitled to rely on Defendant's representations. II. CONCLUSION For the aforementioned reasons, Defendant's motion to dismiss the complaint is GRANTED as to all nine causes of action. The Clerk is hereby directed to close the docket in this matter.SO ORDERED.
S.D.N.Y.,1998. 1:96cv08729 (Docket) (Nov. 20, 1996) FOOTNOTES FN1. Rogath v. Siebenmann (93 Civ. 7566(DAB)). FN2. It is unclear from the Complaint whether the $241,856.44 deposited in Defendant's escrow account includes the $10,000 initially paid when Siebenmann retained Defendant. For the purposes of this motion only, the Court will assume that $10,000 was paid separately to Defendant at the same time that $241,856.44 was deposited in Defendant's escrow account. FN3. This amount represents $70,213.70 (the difference between the initial amount of the Funds in 1993 and the amount deposited with the Clerk in 1996) plus $10,000 paid initially to Defendant. FN4. Plaintiff's legal malpractice claims include violation of Judiciary Law § 487, (Compl.¶¶ 40-41), failure to place the Funds in an interest-bearing account, (Compl.¶¶ 50-53), and charging unreasonable and excessive fees to Siebenmann. (Compl.¶¶ 54-55.) FN5. The Court notes that there is considerable debate between the parties over whether "conversion" occurred when the Funds were deposited into Defendant's escrow account, whether "conversion" occurred when Defendant withdrew money from the account for the purposes of paying fees in the Siebenmann Action, or whether "conversion" occurred at any other time(s). The Court will not address the issue of the date(s) of the alleged conversion because Plaintiff cannot prevail on any of the dates in question. FN6. Siebenmann is not a party to this action. FN7. Nor has Plaintiff alleged that Defendant or any of the intermediate money-handlers (Hudson Shipping, Siebenmann, Bruce Jenkins, Mary Kate Jenkins, or any "others as instructed by Bruce Jenkins") had any obligation at any time to return the money to Plaintiff or otherwise treat the money as if Plaintiff had any rights to the money. See LoPresti, 126 F.3d at 41-42 (conversion does not require segregation of money or wrongful intent; however, defendant must have been under obligation to return or treat money in a particular manner consistent with plaintiff's rights). FN8. Presumably (although it is not alleged in the complaint), more than $250,000 of the $570,000 must have been paid to Siebenmann in order for Siebenmann to have disbursed more than $250,000 to various third parties. (Compl.¶ 15.) FN9. Plaintiff's sixth and seventh claims, for unjust enrichment and attorney's fees, respectively, are also dismissed. Plaintiff alleges that Defendant was unjustly enriched because Defendant "acquired possession of money of Rogath ", (Compl.¶ 43); however, such acquisition is unjust only if Plaintiff has a superior possessory right to the Funds. FN10. Under New York law, privity is required in legal malpractice cases unless there is a showing "of fraud, collusion, malicious acts or other special circumstances". Lucas v. Lalime, 998 F.Supp. 263, 268 (W.D.N.Y.1998); see also Herrick Co., Inc. v. Vetta Sports, Inc., 1996 WL 691993 at *18 (S.D.N.Y.1996) ("Under New York law an attorney cannot be held liable to third parties for injuries caused by services performed on behalf of a client ... absent a showing of fraud, collusion, or a malicious or tortious act"); Crossland Savings FSB v. Rockwood Ins. Co., 700 F.Supp. 1274, 1280-81 (S.D.N.Y.1988) (discussing cases holding the same; "limitation [of liability] is based in part on the concern that imposition of a duty of care to adverse third parties might interfere with [attorney-client relationship]"). Having determined that Defendant owed no duty to Plaintiff because Defendant represented Plaintiff's adversary, Plaintiff's fifth, eighth and ninth claims, for violation of Judiciary Law § 487, interest and attorney's fees, are dismissed because Plaintiff has no standing to bring these claims. FN11. Nor would Plaintiff be entitled to rely on any representation by Defendant. "It is a well settled principle that neither a party nor his attorney may justifiably rely on the legal opinions or conclusions of his or her adversary's counsel." Aglira v. Julien & Schlesinger, P.C., 214 A.D.2d 178, 185, 631 N.Y.S.2d 816, 820 (N.Y.App.Div.1995). When "attorneys engage in face to face negotiations with an adversarial party, New York courts have held that they do not have a duty of care to the third party even if that party with the attorney's knowledge relies on the attorney's representation." Crossland Savings, 700 F.Supp. at 1281. FN12. These are the violation of Judiciary Law § 487 (Fifth Claim), failure to place the Funds in an interest-bearing account (Eighth Claim), and unreasonable attorney fees charged to Siebenmann (Ninth Claim). |
