Hooper Hathaway, PC v. Atlas Techs.

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HOOPER HATHAWAY, PC, Plaintiff/Counterdefendant, and KOHN FINANCIAL CONSULTING, LLC, Intervening Plaintiff/Counterdefendant-Appellee, v. ATLAS TECHNOLOGIES, LLC, and PRODUCTIVITY TECHNOLOGIES CORPORATION, Defendants/Counterplaintiffs-Appellants, and RICHARD J. LANDAU, Appellant.

No. 354976

Court of Appeals of Michigan

February 24, 2022

UNPUBLISHED

Washtenaw Circuit Court LC No. 18-001131-CB

Before: Gleicher, C.J., and Servitto and Letica, JJ.

Per Curiam.

In this action arising from unpaid fees for professional services defendants/counterplaintiffs (defendants) Atlas Technologies LLC (Atlas), and Productivity Technologies, Corporation (PTC), appeal as of right the order granting summary disposition under MCR 2.116(C)(9) (failure to state a valid defense) and MCR 2.116(C)(10) (no genuine issue of material fact) in favor of intervening plaintiff/counterdefendant Kohn Financial Consulting, LLC (KFC), on KFC's claims for breach of contract and account stated, as well as its alternative claims for promissory estoppel and unjust enrichment. The trial court's order also dismissed defendants' counterclaim against KFC for accounting malpractice and found the counterclaim frivolous. Finding no error requiring reversal, we affirm.

I. BASIC FACTS AND PROCEDURAL HISTORY

This case arises from defendants' alleged failure to pay KFC for professional services rendered in relation to federal lawsuits filed by defendants against their former manager and director. PTC is a holding company whose sole asset is Atlas, a manufacturing company created by PTC in 2011. From the time of Atlas's creation until March 2016, Atlas's board of managers consisted of Jesse Levine, Samuel Seidman, and Arthur Stupay, who also served as PTC's directors.

In March 2016, Jesse Levine was fired from Atlas, and in August 2016, defendants filed two lawsuits against Jesse and his father, Julius Levine, in federal court. The lawsuits alleged "fraud, breach of fiduciary duty, conversion, and tortious interference." The Levines responded with multiple counterclaims against defendants and derivative claims against Seidman and Stupay.

Defendants were represented in the federal lawsuits by Hooper Hathaway attorneys Angela Jackson and Adam Linkner. In November 2017, Jackson contacted KFC for an independent financial expert to provide services for the federal cases. Jackson discussed KFC's retention with Seidman, Stupay, and Atlas's Vice President of Finance, Kimberly Nation, and e-mailed them KFC's "Engagement Letter, Engagement Terms and Conditions and a Retainer Invoice for a retainer of $5, 000." Seidman and Stupay authorized Nation to pay the retainer and, on November 17, 2017, Nation wired the $5, 000 retainer fee to KFC on defendants' behalf. KFC's principal, Mauricio Kohn (Kohn), asked for an interim payment of $10, 000 "given the volume of work being done." Three days later, KFC issued to defendants its "Preliminary Independent Expert Report." On December 1, 2017, after receiving authorization from Seidman and Stupay, Nation wired KFC $10, 000. She also e-mailed Kohn that the KFC team "did an amazing job" on the report. On December 30, 2017, KFC invoiced defendants for a balanced owed of $19, 784.75 for services rendered through November 30, 2017.

KFC was also asked to review a report prepared by Charles Hoebeke, the Levines' expert for the federal lawsuits. KFC issued its preliminary rebuttal report of Hoebeke's opinion on January 2, 2018. In February 2018, KFC invoiced defendants for a balance owed of $44, 331.25. On March 22, Nation e-mailed Kohn to explain that defendants were cash-strapped at the moment, but that they intended to pay KFC's invoices and would pay $4, 000 a week until their indebtedness was cleared. The next day, defendants made their first and only $4, 000 payment.

By June 2018, defendants agreed to a settlement with the Levines. The Levines outspent defendants on attorney fees nearly two to one. They pushed defendants nearly to bankruptcy by filing numerous UCC liens and destroying the companies' credit. Seidman and Stupay, who were in their 80s, no longer wished to pursue the lawsuit and against their attorneys' advice, accepted an unfavorable settlement agreement that ceded control of their businesses. Defendants' claims were dismissed, defendants granted a $750, 000 note to Julius Levine as indemnification for litigation costs, and Seidman and Stupay resigned from PTC's board, relinquishing their stock to Jesse and the Levine family. In response to Hooper Hathaway's requests for payment, defendants' present attorney (who had represented the Levines in the federal suit) sent a settlement demand to Hooper Hathaway detailing the law firm's alleged professional malpractice relative to the federal litigation and requesting a response by the end of the month. Hooper Hathaway responded by filing this action against defendants to recover unpaid legal fees, asserting claims for breach of contract, account stated, promissory estoppel, and unjust enrichment. Defendants raised a counterclaim against Hooper Hathaway for professional malpractice and sought nearly $2.8 million in damages. By stipulation of the parties, KFC intervened in the action to recover from defendants $42, 812.44 in unpaid fees. Defendants responded by asserting a counterclaim against KFC for accounting malpractice, seeking $2.7 million in damages.

KFC moved to compel arbitration, arguing that its engagement terms and conditions contained an enforceable provision requiring the parties to arbitrate their disputes. Defendants opposed the motion, alleging that an express agreement to arbitrate did not exist because the engagement letter was not signed by an authorized representative. Defendants further argued that, even if they had agreed to arbitrate, KFC waived that right when it submitted the parties' dispute to the trial court by moving to intervene in the litigation, filing a complaint, and a first amended complaint, all without mentioning the arbitration agreement. The trial court adopted defendants' argument and denied KFC's motion without hearing oral argument. KFC moved for reconsideration, submitting that a signature was not required because the engagement terms and conditions expressly stated that payment of KFC's retainer constituted assent to the agreement, and defendants indisputably paid KFC's retainer.^[1] The trial court denied KFC's motion for reconsideration.

In May 2019, Hooper Hathaway moved for summary disposition of the claims in its complaint, and in October 2019, the trial court granted this motion and dismissed defendants' professional-malpractice claim against the law firm. Two months later, KFC moved for summary disposition of its claims and of defendants' counterclaim. KFC argued that it was entitled to summary disposition of its account-stated claim because it presented prima facie evidence of the amount that defendants owed, defendants expressly accepted KFC's invoices and promised to pay them, and they failed to object to any of the invoices within a reasonable time. KFC asserted that it was entitled to summary disposition of its breach-of-contract claim because extensive evidence established that Nation had actual authority, or at least apparent authority, to bind defendants to KFC's engagement letter. Further, the engagement letter was enforceable despite the absence of a signature because defendants manifested their acceptance of the engagement terms and conditions by paying KFC's retainer fee. KFC alleged in the alternative that all the elements of promissory estoppel and unjust enrichment had been met. Lastly, KFC contended that summary disposition of defendants' counterclaim was appropriate, primarily because KFC was entitled to witness immunity. Both Hooper Hathaway and KFC presented affidavits from Seidman, Stupay, and Nation with their motions, as well as invoices and e-mails tracing the parties' interactions.

In opposition, defendants contended that summary disposition was premature because there had been no document discovery or depositions taken in their case with KFC. Defendants also submitted that KFC's claim for breach of contract failed because the trial court had rejected the argument that the engagement letter was an enforceable contract when ruling on KFC's motion for arbitration. Addressing its counterclaim for accounting malpractice, defendants asserted that it was not barred by witness immunity in light of recent caselaw and that Hoebeke's affidavit supported each element of the counterclaim. It was further alleged that summary disposition of KFC's account-stated claim was inappropriate because there remained disputed fact questions about how much defendants owed as of May 2018, and whether they received KFC's second invoice before the change in management, after which Nation would not have been authorized to accept or to pay the invoice. Defendants did not include affidavits outlining the Levines' version of events. They also failed to present depositions from the federal lawsuits that their counsel asserted would contradict the affidavits of Seidman, Stupay, and Nation.

In a written opinion and order, the trial court granted KFC's motion for summary disposition and dismissed defendants' counterclaim for professional malpractice. The court granted summary disposition in favor of KFC on its account-stated claim on the basis that KFC established prima facie evidence of the amount defendants owed. Additionally, undisputed affidavits from the representatives to the agreement, i.e Seidman, Stupay, and Nation, supported the premise that KFC should be paid for the work it performed. There being no genuine issue of material fact that defendants owed KFC the amount claimed, the trial court granted summary disposition...