Calcutti v. Sbu, Inc.

• Decision Date: 23 July 2003
• Docket Number: No. 02 Civ. 0041(VM).,02 Civ. 0041(VM).
• Citation: 273 F.Supp.2d 488
• Parties: Daniel CALCUTTI, Plaintiff, v. SBU., INC., the Private Bank and Trust Company, Richard G. Monaco, Esq., the Travelers Group, the Travelers Companies and Charter Oak Fire Insurance Co., Defendants. Richard G. Monaco, Third-Party Plaintiff, v. BDO Seidman, LLP, Third-Party Defendant.
• Court: U.S. District Court — Southern District of New York

273 F.Supp.2d 488

Daniel CALCUTTI, Plaintiff, v. SBU., INC., the Private Bank and Trust Company, Richard G. Monaco, Esq., the Travelers Group, the Travelers Companies and Charter Oak Fire Insurance Co., Defendants.

Richard G. Monaco, Third-Party Plaintiff, v. BDO Seidman, LLP, Third-Party Defendant.

No. 02 Civ. 0041(VM).

United States District Court, S.D. New York.

July 23, 2003.

COPYRIGHT MATERIAL OMITTED

Ronald W. Weiner, Steinberg & Cavaliere, LLP, White Plains, NY, Jonathan A. Wexler, David P. Doyle, James V. Garvey, Vedder, Price, Kaufman & Kammholz, New York City, James E. Rocap, III, Ellen Fels Berkman, Baker Botts, LLP, Washington, DC, for Defendants.

DECISION AND ORDER

MARRERO, District Judge.

Plaintiff Daniel Calcutti ("Calcutti") commenced this action in New York state court alleging claims of breach of contract, negligence, negligent misrepresentation, conversion, and contempt against Richard G. Monaco ("Monaco") and the various other named defendants. Monaco removed the matter to this Court pursuant to 28 U.S.C. § 1338. Monaco brought a third-party complaint against BDO Seidman, LLP ("BDO"), pursuant to Fed.R.Civ.P. 14, claiming a right to contribution from BDO for any damages awarded by verdict or judgment to Calcutti from Monaco. Currently before the Court is BDO's motion to dismiss the third-party complaint, pursuant to Fed.R.Civ.P. 12(b)(6), for failure to state a claim. For the reasons discussed below, BDO's motion is DENIED.

I. BACKGROUND

The facts underlying this case are summarized in two prior Decisions and Orders of this Court, one dated September 13, 2002 (the "Monaco Decision"),¹ dismissing a number of Calucutti's claims against Monaco, and the other dated September 18, 2002 (the "Travelers Decision"),² dismissing the complaint ("Complaint" or "Compl."), dated November 16, 2001, in its entirety as against defendants The Travelers Group, The Travelers Companies and Charter Oak Fire Insurance Co. Familiarity with the underlying events as described in those rulings is assumed. In the interest of clarity, the following summary identifies briefly the facts surrounding Monaco's instant motion.

Calcutti was allegedly injured while present on property that was owned by Croton Park Colony, Inc. and insured by The Travelers Group. The injury, which occurred while Calcutti was a minor, resulted in a nerve transplant, partial paralysis, pain and scarring. Calcutti retained Monaco to pursue his legal claims. On or about June 20, 1995, Monaco negotiated a settlement for Calcutti with Croton Park, the original defendant in an action Calcutti brought in the New York State Supreme Court, New York County (the "Underlying Action"). Calcutti entered into a $210,000 settlement of the Underlying Action. On July 21, 1995, the New York court approved the settlement, which was memorialized in an Infant Compromise Order ("ICO"), dated July 21, 1995. In accordance with the terms of the ICO, it was agreed that a trust would be established to fund the settlement. The duties and obligations under the settlement were ultimately assigned to SBU. Through his continuing contact with Calcutti and SBU, Monaco remained involved in the administration of the ICO and the disbursement of settlement funds. Calcutti alleges that he never received any settlement payments from SBU.

In the Monaco Decision, the Court dismissed Calcutti's claims against Monaco for breach of contract, fraud, and conversion, with leave to amend the Complaint by October 15, 2002, and dismissed Calcutti's claim against Monaco for contempt, without leave to amend. As Calcutti has not since amended the Complaint, only claims for negligence, negligent misrepresentation and legal malpractice remain as to Monaco. As against SBU, Inc. ("SBU") and The Privatebank and Trust Company ("Privatebank"), Calcutti asserted claims for fraud, conversion, breach of contract and contempt, as well as negligence and negligent misrepresentation. Privatebank subsequently settled the claims against it.

Monaco's third-party complaint (the "Third-Party Complaint"), dated October 9, 2002, alleges that BDO was SBU's accountant, and that, as such: (1) BDO knew that SBU was engaged in the business of structuring personal injury settlements through the establishment of irrevocable trusts funded with United States Treasury obligations, including the settlement of the Underlying Action; (2) BDO knew that SBU failed to purchase United States Treasury obligations, as required under the terms of the structured settlements, for twenty-two trusts under SBU's supervision, one of which was Calcutti's structured settlement trust; and (3) BDO knew that SBU's use of settlement funds for purposes other than the payment of trust obligations constituted fraud, conversion, theft or felony.

Moreover, Monaco alleges that in December 1997, BDO became aware, through Stephen R. Krause ("Krause"), its partner responsible for the SBU accounts, that SBU had improperly failed to report to the IRS taxable income from settlement funds invested in a grocery store chain, as opposed to the required United States Treasury obligations. Thereafter, according to Monaco, on January 8, 1998, in response to an IRS request, Krause submitted certain documents to the IRS and "upon information and belief, in his submission Krause failed to inform the IRS of information that was material to the determination of [SBU] income for tax year 1995," specifically, that SBU had not purchased United States Treasury obligations with the settlement funds received but instead used that money to purchase and operate grocery stores. (Third-Party Complaint ¶ 20.) Monaco further alleges that BDO knew that the failure to inform the IRS of the alleged income affected the interests of settlement clients, such as Calcutti, and that thereby BDO "knowingly conspired with [SBU] by voluntarily agreeing to assist, explicitly or implicitly, and substantially did assist [SBU's] tortious conversion of funds belonging to or for the benefit of Calcutti ... by conduct including, but not limited to, concealing the fact that [SBU] had received settlement funds but had failed to purchase United States Treasury obligations intended solely to fund structured settlement arrangements." (Id. ¶ 26.)

On the basis of these allegations, Monaco argues that if Calcutti is entitled to recover damages against him, Monaco is entitled to contribution from BDO on account of BDO's actions in aiding and abetting SBU's alleged tortious conversion of Calcutti's settlement funds.

II. DISCUSSION

A. STANDARD OF REVIEW

On a motion to dismiss pursuant to Fed. R.Civ.P. 12(b)(6), the Court must accept as true the factual allegations in the complaint and draw all reasonable inferences in favor of the pleader. Leatherman v. Tarrant County Narcotics and Coordination Unit, 507 U.S. 163, 165, 113 S.Ct. 1160, 122 L.Ed.2d 517 (1993); Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir.1993). Dismissal under this Rule is proper only when "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claims which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); accord Cohen v. Koenig, 25 F.3d 1168, 1172 (2d Cir.1994). The issue that must be determined by the Court "is not whether a Plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). However, where it appears beyond doubt that the non-moving party can prove no set of facts that would entitle it to relief, a district court may grant a Rule 12(b)(6) motion to dismiss. See Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984); Valmonte v. Bane, 18 F.3d 992, 998 (2d Cir.1994).

The Court looks only to matters included in the pleadings when considering a motion to dismiss. See Fed.R.Civ.P. 12(b); see also Cortec Industries, Inc. v. Sum Holding L.P., 949 F.2d 42, 47 (2d Cir. 1991). If matters outside the pleadings are presented to the Court on a Rule 12(b)(6) motion to dismiss, the Court may either exclude the extrinsic documents or convert the motion to one for summary judgment pursuant to Rule 56, granting the parties time for additional discovery and allowing them to submit the additional materials necessary for a Rule 56 motion. See Chambers v. Time Warner, Inc., 282 F.3d 147, 154 (2d Cir.2002) (citations omitted).

B. CONTRIBUTION UNDER THEORY OF AIDING AND ABETTING

Monaco argues that, under the theory of concerted-action liability, if judgment were entered against him, he would be entitled to contribution from BDO because BDO could be found liable to Calcutti. Specifically, Monaco argues that BDO lent aid and encouragement to SBU in SBU's tortious conduct toward Calucutti.

Essentially, Monaco claims that he is entitled to contribution from BDO because BDO aided and abetted the alleged conversion committed by SBU, not for BDO's concerted action with Monaco, who is only being sued for malpractice and negligence. In the Third-Party Complaint, Monaco's allegations solely relate to BDO's concerted action with SBU and indicate no relationship between BDO and Monaco whatsoever, other than that the alleged injury to Calcutti — the failure to receive settlement payments — was allegedly the result of both the fraud, negligence and conversion committed by SBU, allegedly aided and abetted by BDO, and the alleged negligence committed by Monaco.

Under New York law, which the Court presumes applies to the contribution claim since it is the state law cited by the parties with regard to the aiding and abetting cause of action, see International Bus. Machines Corp. v. Liberty Mut. Fire Ins. Co., 303 F.3d 419, 423 (2d Cir.2002), claims for contribution may be asserted "between two or more persons who are subject to liability for the same personal injury, injury to property or wrongful death." N.Y....