Joseph v. Fensterman

204 A.D.3d 766

167 N.Y.S.3d 106

Stanley JOSEPH, etc., et al., appellants,

v.Howard FENSTERMAN, et al., respondents (and another caption).

2018–03623

Index No. 10021/15

Supreme Court, Appellate Division, Second Department, New York.

Argued—January 18, 2022

April 13, 2022

Fryman, P.C., Valley Stream, NY (David J. Fryman, Rusk, Wadlin, Heppner & Martuscello, LLP [E. Michael Kavanagh ], and Lynn Gartner Dunne, LLP [Kenneth L. Gartner ], of counsel), for appellants.

Law Office of Steven Cohn, P.C., Carle Place, NY (Abrams, Fensterman, Fensterman, Eisman, Formato, Ferrara, Wolf & Carone, LLP [Keith J. Singer ], of counsel), for respondents.

MARK C. DILLON, J.P., COLLEEN D. DUFFY, FRANCESCA E. CONNOLLY, LINDA CHRISTOPHER, JJ.

DECISION & ORDER

In an action, inter alia, to recover damages for violations of Judiciary Law § 487 and legal malpractice, the plaintiffs appeal from an order of the Supreme Court, Nassau County (Stephen A. Bucaria, J.), dated January 3, 2018. The order, insofar as appealed from, granted those branches of the defendants’ motion which were pursuant to CPLR 3211(a) to dismiss the first through sixth, eighth, tenth, thirteenth, and fourteenth causes of action in the amended complaint.

ORDERED that the order is modified, on the law, by deleting the provisions thereof granting those branches of the defendants’ motion which were pursuant to CPLR 3211(a) to dismiss the first, second, fourth, thirteenth, and fourteenth causes of action, and the sixth and tenth causes of action insofar as asserted against the defendants Lori Fensterman, Jordan Fensterman, and Staci Fensterman, and substituting therefor provisions denying those branches of the defendants’ motion; as so modified, the order is affirmed insofar as appealed from, with costs payable to the plaintiffs.

In November 2014, the plaintiffs commenced this action, inter alia, to recover damages for violations of Judiciary Law § 487 and legal malpractice. The plaintiffs thereafter amended the complaint, asserting, as is relevant to this appeal, causes of action to recover damages for violations of Judiciary Law § 487, fraud, legal malpractice, breach of fiduciary duty, tortious interference with prospective business relations, breach of contract, and an accounting. The defendants then moved, inter alia, pursuant to CPLR 3211(a)(1), (5), and (7) to dismiss the amended complaint. As is relevant to this appeal, in an order dated January 3, 2018, the Supreme Court granted those branches of the defendants’ motion which were to dismiss the first through sixth, eighth, tenth, thirteenth, and fourteenth causes of action in the amended complaint. The plaintiffs appeal.

"On a motion to dismiss pursuant to CPLR 3211(a)(7), the complaint is to be afforded a liberal construction, the facts alleged are presumed to be true, the plaintiff is afforded the benefit of every favorable inference, and the court is to determine only whether the facts as alleged fit within any cognizable legal theory" ( Gorbatov v. Tsirelman, 155 A.D.3d 836, 837, 65 N.Y.S.3d 71 ). " ‘Whether a plaintiff can ultimately establish its allegations is not part of the calculus in determining a motion to dismiss" ( Bianco v. Law Offs. of Yuri Prakhin, 189 A.D.3d 1326, 1329, 138 N.Y.S.3d 576, quoting EBC I, Inc. v. Goldman, Sachs & Co., 5 N.Y.3d 11, 19, 799 N.Y.S.2d 170, 832 N.E.2d 26 ; see Carlson v. American Intl. Group, Inc., 30 N.Y.3d 288, 298, 67 N.Y.S.3d 100, 89 N.E.3d 490 ).

The Supreme Court should have denied that branch of the defendants’ motion which was to dismiss the first cause of action in the amended complaint, which sought to recover damages for violations of Judiciary Law § 487 related to the defendants’ representation of the plaintiffs in a litigation concerning the sale of the plaintiffs’ interests in three skilled nursing facilities known as New Franklin, Fort Tyron, and Split Rock (hereinafter the New Franklin litigation). An attorney is liable under Judiciary Law § 487(1) if he or she "[i]s guilty of any deceit or collusion, or consents to any deceit or collusion, with intent to deceive the court or any party," and under Judiciary Law § 487(2) if he or she "[w]illfully delays his [or her] client's suit with a view to his [or her] own gain" (see Melcher v. Greenberg Traurig, LLP, 23 N.Y.3d 10, 12, 988 N.Y.S.2d 101, 11 N.E.3d 174 ; Gorbatov v. Tsirelman, 155 A.D.3d at 838, 65 N.Y.S.3d 71 ). " ‘Allegations regarding an act of deceit ... must be stated with particularity’ " ( Gorbatov v. Tsirelman, 155 A.D.3d at 838, 65 N.Y.S.3d 71, quoting Facebook, Inc. v. DLA Piper LLP [US], 134 A.D.3d 610, 615, 23 N.Y.S.3d 173 ).

Here, the first cause of action adequately pleaded a claim to recover damages for violations of Judiciary Law § 487 (see Bianco v. Law Offs. of Yuri Prakhin, 189 A.D.3d at 1329, 138 N.Y.S.3d 576 ), as it alleged that the defendants Abrams, Fensterman, Fensterman, Eisman, Formato, Ferrara & Wolf, LLP (hereinafter the law firm), Howard Fensterman, and Sarah C. Lichtenstein intentionally interfered with the settlement of the New Franklin litigation, causing years of additional litigation, in order to generate legal fees in the amount of $1.7 million, which amount the plaintiffs alleged was paid from the proceeds of the sale of the skilled nursing facilities. The plaintiffs alleged that they were entitled to a portion of those proceeds. The amended complaint also alleged that Howard Fensterman made false statements to the plaintiffs, and filed a motion without the plaintiffs’ knowledge or consent. The Supreme Court's determination that Howard Fensterman's conduct during the settlement of the New Franklin litigation "was simply a product of his conflict of interest in representing both buyers and sellers in the New Franklin and Fort Tyron transactions" is a premature factual finding inappropriate at this stage of the litigation (see Warney v. State of New York, 16 N.Y.3d 428, 436–437, 922 N.Y.S.2d 865, 947 N.E.2d 639 ; Matter of Gerard P. v. Paula P., 186 A.D.3d 934, 938, 130 N.Y.S.3d 105 ).

The Supreme Court also should have denied that branch of the defendants’ motion which was to dismiss the second cause of action, to recover damages for fraud the plaintiffs allege was perpetrated against the plaintiff Anthony Bacchi and Martin Farbenblum, the decedent of the plaintiff Stanley Joseph, by the law firm and Howard Fensterman. " ‘The elements of a cause of action for fraud require a material misrepresentation of a fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff and damages’ " ( Emby Hosiery Corp. v. Tawil, 196 A.D.3d 462, 464, 151 N.Y.S.3d 406, quoting Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553, 559, 883 N.Y.S.2d 147, 910 N.E.2d 976 ). " ‘When a plaintiff brings a cause of action based upon fraud, the circumstances constituting the wrong shall be stated in detail’ " ( Edelman v. Berman, 195 A.D.3d 995, 997, 151 N.Y.S.3d 123, quoting Sargiss v. Magarelli, 12 N.Y.3d 527, 530, 881 N.Y.S.2d 651, 909 N.E.2d 573 [internal quotation marks omitted]; see CPLR 3016[b] ). "However, the pleading requirements of CPLR 3016(b) may be met when the facts are sufficient to permit a reasonable inference of the alleged conduct" ( Berkovits v. Berkovits, 190 A.D.3d 911, 915, 141 N.Y.S.3d 84 ; see Pludeman v. Northern Leasing Sys., Inc., 10 N.Y.3d 486, 492, 860 N.Y.S.2d 422, 890 N.E.2d 184 ).

Here, the second cause of action pleaded with the necessary particularity the elements of fraud against the law firm and Howard Fensterman (see Emby Hosiery Corp. v. Tawil, 196 A.D.3d at 465, 151 N.Y.S.3d 406 ). Contrary to the defendants’ contention, " ‘[a] false statement, promissory in nature, may be deemed the statement of a material existing fact, because it falsely represents the [declarant's] state of mind and the state of his [or her] mind is a fact’ " ( Neckles Bldrs., Inc. v. Turner, 117 A.D.3d 923, 925, 986 N.Y.S.2d 494, quoting Tribune Print. Co. v. 263 Ninth Ave. Realty, Inc., 57 N.Y.2d 1038, 1041, 457 N.Y.S.2d 785, 444 N.E.2d 35 [internal quotation marks omitted]). Viewed in the light most favorable to the plaintiffs, the second cause of action alleged, inter alia, that Howard Fensterman and the law firm promised to transfer a 10% membership interest in a skilled nursing facility known as Bay Park Center for Nursing and Rehabilitation, LLC (hereinafter the Bay Park Operating Company), to Martin Farbenblum and another 10% interest to Bacchi, after the acquisition of the Bay Park Operating Company closed, if Martin Farbenblum and Bacchi made capital contributions to the Bay Park Operating Company. The second cause of action also alleged, among other things, that Howard Fensterman and the law firm made that promise while harboring an undisclosed intention never to transfer those 10% membership interests and that Martin Farbenblum and Bacchi detrimentally relied on this representation by Howard Fensterman and the law firm by making the full capital contribution (see Neckles Bldrs., Inc. v. Turner, 117 A.D.3d at 925–926, 986 N.Y.S.2d 494 ).

Contrary to the plaintiffs’ contention, the Supreme Court properly granted that branch of the defendants’ motion which was to dismiss the third cause of action, to recover damages for legal malpractice against the law firm, Howard Fensterman, Robert Fensterman, Kathleen Eisman, as executor of the estate of Steven J. Eisman, and Patrick Formato (hereinafter collectively the Operating Company attorneys) based upon their representation of Martin Farbenblum and Bacchi in the Bay Park Operating Company acquisition. " ‘To state a cause of action to recover damages for legal malpractice, a plaintiff 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 plaintiff actual and ascertainable damages’ " ( Lopez v. Lozner & Mastropietro, P.C....