Campbell v. Rogers & Wells

• Decision Date: 17 August 1995
• Citation: 218 A.D.2d 576,631 N.Y.S.2d 6
• Parties: Robert B. CAMPBELL, Plaintiff-Appellant-Respondent, v. ROGERS & WELLS, Defendant-Respondent-Appellant.
• Court: New York Supreme Court — Appellate Division

Page 6

631 N.Y.S.2d 6

218 A.D.2d 576

Robert B. CAMPBELL, Plaintiff-Appellant-Respondent, v.ROGERS & WELLS, Defendant-Respondent-Appellant.

Supreme Court, Appellate Division First Department.

Aug. 17, 1995.

P.R. Hoffman, for plaintiff.

W.J. Schwartz, for defendant.

Before RUBIN, J.P., and ROSS, NARDELLI and MAZZARELLI, JJ.

MEMORANDUM DECISION.

Judgment, Supreme Court, New York County (Ira Gammerman, J.), entered February 2, 1994, which upon defendant-respondent-cross-appellant's post trial motion granted a judgment in favor of the defendant dismissing plaintiff's complaint, unanimously reversed, on the law, the facts and in the exercise of discretion, without costs, the complaint is reinstated and the matter remanded for a new trial before a different Justice.Defendant-respondent-cross-appellant's cross appeal from orders of the same court and Justice, entered on or about November 24, 1993, December 1, 1993 and December 10, 1993, unanimously dismissed as superseded by the appeal from the judgment and on the ground that defendant-respondent was not aggrieved thereby (CPLR 5511;CPLR 5501(a)[1], without costs.

Plaintiff is the majority stockholder, President and CEO of BBC International, Inc., a shoe importing company.The claims of legal malpractice asserted against the defendant law firm arose out of the defendant-respondent's representation of the plaintiff in connection with his acquisition of Amfesco Industries Inc.(Amfesco), a publicly owned shoe manufacturing company in (11 USC)Chapter 11 Bankruptcy.Three acts of legal malpractice were alleged.

The first involves a personal guarantee issued by the plaintiff.Plaintiff first explored the acquisition of Amfesco Industries in 1986.Initial negotiations failed but were recommenced in 1987.Plaintiff had retained the defendant firm, specifically bankruptcy partner Joseph Levie, to assist him.The negotiations, which took place in September and early October 1987, involved a $6.5 million cash payment of prepetition debt Amfesco was required to make to its creditors.Plaintiff apparently reached a compromise with Amfesco's creditors, pursuant to which, the amount of the cash payment would remain the same, but payment would be deferred over one year.In exchange for the deferral plaintiff agreed to personally guarantee the payments.Plaintiff alleged that Levie was negligent in that he never advised him, that pursuant to General Obligations Law section 5-701(a)(2), the oral guarantee of the deferred payments given by plaintiff was not enforceable and that such a guarantee of prepetition debt was extraordinary and, based on plaintiff's superior bargaining position, unneeded.

The second act of malpractice concerns plaintiff's execution of a written commitment to finance Amfesco's reorganization plan and to then purchase the company upon its reorganization.Pursuant to a Management Agreement executed in November 1987, plaintiff was provided with the authority to supervise Amfesco's operations, hire and fire pending the reorganization.Plaintiff also agreed to make an additional $4.5 million available to Amfesco on an unsecured basis.The Management Agreement was approved by the Bankruptcy Court on December 9, 1987 and thereafter plaintiff executed the written commitment.Plaintiff alleged that the defendant committed malpractice by failing to advise him against signing the commitment letter, by not explaining what legal obligations such a letter entailed and by not suggesting to Amfesco's counsel that the deal be consummated without the letter.Plaintiff maintained that he signed the letter without legal guidance, however he acknowledged at trial that he knew that the commitment letter would legally bind him to fund the reorganization.At trial, plaintiff's expert testified that such a commitment letter was not required under the Bankruptcy Code.

The third act of malpractice alleged by the plaintiff concerns plaintiff's desire to withdraw from the deal, expressed to Levie in March 1988 and referred to by the parties as the "mid-March conversation".Plaintiff alleged that Levie, in response to his desire to withdraw from the deal, merely told him that if he withdrew and breached the terms of the commitment letter, he would be sued by everyone.Plaintiff alleged that defendant committed malpractice by failing to follow up on the conversation and advising the plaintiff of alternatives.According to the plaintiff, his experts later told him that if he withdrew from the deal and was sued, and the litigation did not settle or Amfesco did not find another buyer, any amounts he would be found liable for would be offset by monies Amfesco owed him pursuant to prior loan agreements plus interest.

As a result of the failed reorganization/acquisition of Amfesco plaintiff's company BBC International, Inc., which had loaned funds to Nasco, a company formed by plaintiff to be the successor to Amfesco if the deal succeeded, filed for Chapter 11 Bankruptcy in December 1989.Nasco had filed for Chapter 11 protection in September 1989.Plaintiff was then personally forced into (11 USC)Chapter 7 Bankruptcy in January 1990; this was later converted into a Chapter 11 Bankruptcy.In all, plaintiff alleged that he lost approximately $5.6 million and suffered a $13.1 million diminution of the value of his stock in BBC International, Inc.

The case was tried before Justice Gammerman between November 10, 1993 and December 10, 1993.Plaintiff moved for a mistrial with a new trial to be held before a different judge arguing that Justice Gammerman improperly interjected himself into the proceedings so as to inhibit the jury's ability to calmly resolve the case.The motion was denied.At the close of plaintiff's case the defendant moved for a directed verdict and the court reserved decision with respect to the claims relating to the guarantee and commitment letter and denied the motion with respect to the mid-March conversation claim.The motion was renewed at the close of the evidence and the court adhered to its prior decision, and its decision on the motions remained reserved.

After seven days of deliberation the jury reported a three to three deadlock on seventeen of the eighteen special verdict questions submitted.The only conclusion reached by the jury was that Levie was negligent with respect to the "mid-March conversation".However, the jury remained deadlocked on the question of whether said negligence caused plaintiff to suffer any injury.The trial court then granted the defendant's motion to dismiss the guarantee and commitment letter claims as a matter of law, finding that plaintiff's decisions with respect to the guarantee and the commitment letter were business decisions, which could not...