30 Carmine LLC v. Jay Arthur Goldberg, P.C.
| Decision Date | 02 December 2010 |
| Docket Number | Index No. 116990/2009 |
| Citation | 2010 NY Slip Op 34121 (U) |
| Parties | 30 CARMINE LLC a/k/a DEAN ROSS, 174 HESTER ST. LLC a/k/a DEAN ROSS, 171 MULBERRY LLC a/k/a DEAN ROSS and 109 ELDRIDGE LLC a/k/a DEAN ROSS, Plaintiffs, v. JAY ARTHUR GOLDBERG, P.C. a/k/a JAY ARTHUR GOLDBERG, P.C., ESQ. a/k/a LAW OFFICES OF JAY ARTHUR GOLDBERG, P.C., Defendant. |
| Court | New York Supreme Court |
DECISION AND ORDER
This is an action for declaratory relief and to recover damages for alleged overpayments for legal services rendered by defendant for tax certiorari work. Before the court is plaintiffs' motion for an order: (1) pursuant to CPLR § 3211 (a) (1) and (7) dismissing all counterclaims asserted against Dean Ross individually; (2) pursuant to CPLR § 3024 (b) striking defendant's answer for improperly referring to an arbitration which is subject to de novo review; (3) alternatively, striking from the answer all references to the prior arbitration; and (4) pursuant to 22 NYCRR 130-1.1 awarding plaintiffs sanctions against defendant for frivolous conduct. Defendant opposes the motion and cross moves to compel plaintiffs to reply to its counterclaims within seven (7) days of the order and setting the matter down for an immediate trial.
The controversy between the parties emanates from a dispute as to legal fees claimed by defendant Jay Arthur Goldberg, P.C. a/k/a Jay Arthur Goldberg, P.C., Esq. a/k/a Law Offices of Jay Arthur Goldberg, P.C. ("Goldberg" or "defendant") to be owing from plaintiffs 30 Carmine LLC a/k/a Dean Ross, 174 Hester St., LLC a/k/a Dean Ross, 171 Mulberry LLC a/k/a Dean Ross and 109 Eldridge LLC a/k/a Dean Ross (collectively "plaintiffs"). The facts underlying the dispute are derived from the verified complaint. In March and April 2007, Goldberg was retained by the plaintiffs, each of which is a limited liability company ("LLC"), pursuant to written retainer agreements (the "Retainer Agreement"), which were signed in each instance by Dean Ross ("Ross"), an attorney, as member of such LLCs (Affidavit of Dean Ross in Support of Motion [Ross Aff.], Ex. "J", Ver. Compl. ¶¶ 6-9). Goldberg was retained for the purpose of performing tax certiorari work in an effort to reduce the valuation of the respective plaintiffs' property for certain specified tax years. Each of the Retainer Agreements provided that fee disputes under $50,000.00 would be submitted to binding arbitration pursuant to Part 137 of the New York Rules of the Chief Administrator (22 NYCRR). After Goldberg performed services pursuant to the Retainer Agreements, a dispute arose as to the amount of legal fees owed to Goldberg. Pursuant to the provision in the Retainer Agreements, the parties submitted the fee dispute to arbitration. A three-member arbitration panel made awards in favor of Goldberg against each of the plaintiffs and Ross, individually, in the aggregate sum of $35,694.25, The arbitration awards were mailed to plaintiffs, Ross and defendant on or about November 4, 2009.
Plaintiffs then timely commenced this plenary action by filing a summons with notice on December 3, 2009, seeking de novo review of the fee dispute as permitted by section 137.8 of the Rules of the Chief Administrator. The Notice stated that the action was for a declaration "as to what, if anything, Plaintiffs owe Defendant in connection with tax certiorari work allegedly performed by Defendant to reduce real estate taxes for the 2008/2009 tax year" and also for a declaration and monetary relief "for overpayment of legal fees in connection with tax certiorari work allegedly performed by Defendant for plaintiff 30 Carmine LLC to reduce real estate taxes for the 2007/2008 tax year". Pursuant to defendant's demand, on or about April 26, 2010, plaintiffs served a verified complaint seeking essentially the same relief as was indicated in the Notice.
Issue was joined by service of Goldberg's verified answer in which it admits that it provided tax certiorari legal services to plaintiffs pursuant to written retainer agreements it drafted with information provided by Ross, it achieved significant reductions in the assessed values of plaintiffs' properties for the 2008/2009 tax year and for the 2007/2008 tax year, and it states that it was owed the aggregate sum of $36,902.25 (Ross Aff. Ex. "K", Ver. Ans., ¶ 8). Goldberg otherwise denies many of the material allegations of the verified complaint, interposes as affirmative defenses that the action is barred by the doctrines of res judicata, collateral estoppel and laches and counterclaims against plaintiffs and Ross, individually, to recover as against the plaintiffs and Ross the aggregatesum of $36,902.25 for legal services rendered, with interest from May 6, 2008, upon theories of breach of contract, quantum meruit, and account stated (id.).
Soon after this plenary action was commenced, by petition filed December 17, 2009, defendant commenced a proceeding to confirm the arbitration award (Jay Arthur Goldberg, P.C. v 30 Carmine LLC, 174 Hester St. LLC, 171 Mulberry LLC, 109 Eldridge LLC and Dean Ross, Index No. 117674/2009) (the "Confirmation Action"). The Confirmation Action was dismissed by decision and judgment entered March 24, 2010 (Stallman, Michael D., J.), on the ground that the subject retainer agreements did not explicitly provide that the clients were waiving their right to de novo review of the arbitration award (Jay Arthur Goldberg, P.C. v 30 Carmine LLC, 27 Misc3d 680 [Sup Ct, N.Y. Co. 2010]). Justice Stallman denied Goldberg's request to consolidate the Confirmation Action with this plenary action stating that "[b]ecause respondents are entitled to de novo review, the arbitral awards have no binding effect on the plenary action" (id. at 683). Defendant's appeal from the decision and judgment in the Confirmation Action is now pending before the Appellate Division, First Department (see Affidavit of Dean Ross in Support of Motion [Ross Aff.], Ex. "K", Verified Answer, ¶ 29).
Plaintiffs now move, inter alia, pursuant to CPLR § 3211 (a) (1) and (7) to dismiss the counterclaims as against Ross in his individual capacity. In support of the motion, Ross, who is a member of each of the plaintiff LLCs and appearing as plaintiffs' counsel, submits his personal affidavit in which he avers on the basis of documentary evidence, namely the Retainer Agreements, that he did not retain Goldberg in his individual capacity to perform legal services on behalf of plaintiffs nor was any of the legal work provided for him in his individual capacity, but rather such work was performed solely for the plaintiff LLCs.
In opposition, defendant submits his attorney's affirmation which claims that the counterclaims are properly stated against Ross individually as Ross "has blurred the lines between himself as an individual and his real estate entities."
Accepting as true the facts pleaded by defendant and according defendant the benefit of every favorable inference to be drawn from those facts (see EBC I v Goldman, Sachs & Co., 5 NY3d 11, 19 [2005]; Guggenheimer v Ginzburg, 43 NY2d 268, 275 [1977]), defendant has failed to state a cause of action as against Ross individually. Here, there is no dispute that each of the named plaintiffs is a limited liability company. It is well settled that pursuant to section 609 (a) of theLimited Liability Company Law, members and managers of a limited liability company are statutorily exempt from individual liability for the obligations or liabilities of such company, unless the "veil" of the limited liability company is pierced (see Retropolis, Inc. v 14th St. Development LLC, 17 AD3d 209, 210 [1st Dept 2005]; Collins v E-Magine, 291 AD2d 350, 351, lv denied 98 NY2d 605 [2002]). A party seeking to pierce a corporate (or limited liability) veil "bear[s] a heavy burden of showing that the corporation was dominated as to the transaction attacked and that such domination was the instrument of fraud or otherwise resulted in wrongful or inequitable consequences . . . Evidence of domination alone does not suffice without an additional showing that it led to inequity, fraud or malfeasance . . . " (TNS Holdings, Inc. v MKI Securities Corp., 92 NY2d 335, 339 [1998]; see Matter of Morris v New York State Dept. of Taxation and Finance, 82 NY2d 35 [1993]; Collins, 291 AD2d at 351).
In the case at bar, defendant has alleged no facts in support of his counterclaims that may serve as a predicate for Ross' individual liability. Goldberg does not claim that it was retained by Ross individually, that Ross signed the retainer agreements in his individual capacity, or that Goldberg believed that it was being retained by Ross individually. Nor does the record show that Ross dominated the plaintiff LLCs and used such domination to commit a fraud or other tortious act. Ross simply cannot be held liable for the plaintiffs' obligations by mere virtue of his status as a member of the respective plaintiffs LLCs. Accordingly, the counterclaims must be dismissed to the extent that they are asserted against Ross in his individual capacity.
Plaintiffs also move pursuant to CPLR § 3024 (b) to strike defendant's verified answer for improperly referring to the arbitration which is subject to de novo review in this proceeding or, alternatively, striking all references to the arbitration contained in the verified answer. Plaintiffs contend that defendant's references to the prior arbitration and award are irrelevant to this action, are highly prejudicial and have "irretrievably tainted" this action (Ross Aff. ¶¶ 12, 18-22). Moreover, they contend that because such references are incorporated into the majority of the answer making the excising of prejudicial matter extremely difficult, the entire answer should be stricken.
Defendant contends that he raised the issue of the arbitration and award in his answer in order to preserve his rights with respect to his pending appeal in the...
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