Capizzi v. Brown Chiari LLP

• Decision Date: 08 June 2022
• Docket Number: 2022-50485,Index No. 2016-810115
• Citation: 2022 NY Slip Op 50485 (U)
• Parties: Samuel J. Capizzi, Plaintiff, v. Brown Chiari LLP, James E. Brown, and Donald B. Chiari, Defendants.
• Court: New York Supreme Court

2022 NY Slip Op 50485(U)

Samuel J. Capizzi, Plaintiff, v. Brown Chiari LLP, James E. Brown, and Donald B. Chiari, Defendants.

No. 2022-50485, Index No. 2016-810115

Supreme Court, Erie County

June 8, 2022

Unpublished Opinion

WEBSTER SZANYI LLP

Kevin Szanyi, Esq.,

Thomas S. Lane, Esq.,

Steven R. Hamlin, Esq.,

RUPP BAASE PFALZGRAF CUNNINGHAM LLC

R Anthony Rupp, III, Esq.,

James Graber, Esq.,

HODGSON RUSS LLP

Benjamin M. Zuffranieri, Jr., Esq.,

Marissa A. Coheley, Esq.,

James E. Brown

Timothy J. Walker, J.

Both Plaintiff, Samuel J. Capizzi, and Defendants, Brown Chiari LLP ("BCLLP", James E. Brown, and Donald B. Chiarai, have applied for partial summary judgment in connection with the extent of Capizzi's interest in BCLLP at the time he resigned from the law firm.

Defendants' motion (Motion 18; Doc. 346) seeks an order,

finding Plaintiff's interest in BCLLP is limited to his right to a share of income commensurate with and while he is making contributions to the firm and that Plaintiff has no interest in the files remaining at the firm when he departed.

Capizzi's motion (Motion 19; Doc. 375) seeks an order,

providing that Capizzi's equity interest is 33 and 1/3rd % because Defendants contend the parties never agreed on ownership percentages, and because 33 and 1/3rd % (equal shares) is the default provision mandated by New York Partnership Law when partners have not agreed on different percentages. Alternatively, an Order providing Capizzi's equity interest is 20% as Capizzi has testified.

BACKGROUND

Capizzi commenced this action on September 13, 2016, seeking, inter alia, an order declaring that BCLLP

was dissolved effective January 8, 2016 and that Defendants are required to wind up the affairs of [BCLLP] and to provide a full and complete accounting of [BCLLP's] assets, liabilities, income and expenses to [Capizzi].

(Doc. 94, Wherefore Clause [a]).

On September 13, 2019, this court issued a Decision and Order which,

ORDERED AND DECLARED that, as of the date of his resignation from Brown Chiari LLP on January 8, 2016, Plaintiff, Samuel J. Capizzi, was an equity partner in the Brown Chiari LLP law firm.

(Doc. 141, p. 15) (capitalization and emphasis in original). The Appellate Division, Fourth Department ("Fourth Department") affirmed the September 13, 2019 Decision and Order (Capizzi v. Brown Chiari LLP, 194 A.D.3d 1457 [4th Dept 2021]).

On October 15, 2019, this court issued a Decision and Order which held, inter alia,

that... the Court hereby declares that... [BCLLP] was dissolved, effective January 8, 2016, upon Samuel Capizzi's resignation from the law firm...

(Doc. 159, p. 3). Defendants appealed from the October 15, 2019 Decision and Order (Doc. 162), and the Fourth Department affirmed (Capizzi v. Brown Chiari LLP, 194 A.D.3d 1460 [4th Dept 2021]).

On January 20, 2022, this court issued a Decision and Order, which

ORDERED, that the chart at page 10 of Plaintiff's Response Memorandum of Law (Doc. 337) reflects the manner in which the unresolved contingency fee cases shall be valued as of the Valuation Date (with the caveat that Plaintiff may ultimately decide to make a different election under Partnership Law §73); and it is further

ORDERED, that the valuation of Plaintiff's interest in the Dissolved Firm shall otherwise proceed consistent with this Decision and Order.

(Doc. 342, p. 10) (capitalization and emphasis in original). There were no appeals from the January 20, 2022 Decision and Order.

The next step in the progression of this matter is for the court to determine and declare the extent of Capizzi's interest in BCLLP at the time he resigned from the law firm on January 8, 2016.

The parties have stipulated to the identity of a referee who shall review the disputed contingency fee files at BCLLP as of January 8, 2016 ("Disputed Files" or "Files"), and make a report and recommendation to the court in connection with Capizzi's claims ("Referee"). However, before doing so, this court must decide the pending applications to provide guidance to the Referee.

DISCUSSION

According to Capizzzi, at the time he resigned from BCLLP on January 8 2016 (resulting in the immediate dissolution of BCLLP), "more than 1, 600 contingent fee cases... existed" at the dissolved firm (Doc. 417, p. 6). Capizzi seeks a 33.33% interest in the Disputed Files. Defendants, on the other hand, contend that Capizzi has no interest in such Files, because the parties had agreed (prior to Capizzi's resignation) that "if one of them departed the firm, they could take their files with them and they had no interest in on-going files at the firm after they left" ("Alleged Agreement") (Doc. 374, p. 11).

Absent any agreement between the partners, the default provisions of Partnership Law ("PL") §40 apply, which provide, in relevant part, as follows:

Each partner shall be repaid his contributions, whether by way of capital or advances to the partnership property and share equally in the profits and surplus remaining after all liabilities, including those to partners, are satisfied...

(PL §40[1]; see also 220-52 Assocs. v. Edelman, 253 A.D.2d 352, 352 [1st Dept 1998]).

An agreement with respect to the division of profits does not conclusively establish an agreement with respect to equity. The absence of a clear agreement on equity leads to the default partnership rules and requires a distribution of all partnership assets equally (220-52 Assocs., 253 A.D.2d 352 [partners shared equally in equity of partnership notwithstanding agreement to divide income 90%/10%; "the precise rights of father and son in the partnership had remained ambiguous and unstated. In light of its finding that there was no actual agreement to the contrary, the trial court properly held that the partnership assets would be distributed equally"]).

Partners may agree to depart from the default rules set forth in New York's Partnership Law (Congel v. Malfitano, 31 N.Y.3d 272, 287-88 [2018]). However, they must do so,

in language that is clear, unequivocal and unambiguous. No particular magic words need be recited, provided that the parties' intent is clear.

(Id.) (quotations and citations omitted) (see also, Verizon New York, Inc. v. Barlam Const. Corp., 90 A.D.3d 1537, 1538 [4th Dept 2011] ["[T]he burden of proving the existence, terms and validity of a contract rests on the party seeking to enforce it"]).

Whether the Alleged Agreement Exists and Is Enforceable

It is undisputed that no writing exists confirming the Alleged Agreement or otherwise stating its essential terms. The lack of a writing, however, is not fatal to Defendants' position, because it is well settled that the terms of a partnership agreement may be the product of an oral agreement (Moses v. Savedoff, 96 A.D.3d 466, 469 [1st Dept 2012]). That said, in order for an oral agreement to be enforceable, the party seeking enforcement (here Defendants) have the burden of demonstrating a manifestation of mutual assent and that the oral agreement's terms are clear and sufficiently definite (Charles Hyman, Inc. v. Olsen Indus. Inc., 277 A.D.2d 270, 275 [1st Dept 1996]; Ruppert v. Long Island R. Co., 281 A.D.2d 466, 467 [2d Dept 2001];); Express Indus. & Terminal Corp. v. New York State Dep't of Transp., 93 N.Y.2d 584, 589 [1999]).

Defendants have failed to sustain their burden, because they have failed to: (i) explain the Alleged Agreement's precise terms; (ii) show when the Alleged Agreement was made (a precise date or even a year); (iii) identify the parties to the Alleged Agreement when it was originally made, or the circumstances under which the parties made it; (iv) overcome Capizzi's testimony that the Alleged Agreement was just an "understanding" of his rights as an employee /non-equity partner in Brown, Chiari, Capizzi & Frascogna, LLP ("Frascogna Firm"), a different law firm that pre-existed BCLLP; and (v) dispute Capizzi's testimony that the four "partners" in the Frascogna Firm never discussed this understanding or explained how there can be an "agreement" under such circumstances. In ths regard, Capizzi testified: "We never had discussions amongst the four of us" (Doc. 352, pp. 82-84) (Gyabaah v. Rivlab Transp. Corp., 102 A.D.3d 451, 452 [1st Dept 2013] aff'd, 22 N.Y.3d 1018 [2013] ["it is essential in any bilateral contract that the fact of acceptance be communicated to the offeror"] citing D'Agostino Gen. Contrs. v. Steve Gen. Contr., 267 A.D.2d 1059 [4th Dept.1999]).

The Frascogna Action

The Frascogna Firm was established on December 16, 1997, and on April 21, 2004, Frank Frascogna resigned from it. In August 2004, Frascogna commenced an action against Brown, Chiari Capizzi & Frascogna LLP, and those individuals whom he characterized as the law firm's individual partners namely, Capizzi and the individual defendants in this action - Brown and Chiari ("Frascogna Action").

Frascogna contended that, inter alia, he was a general partner in the Frascogna Firm; the partnership underwent a dissolution upon his withdrawal from it on April 21, 2004; and that he was entitled to both a dissolution of it, pursuant to PL sections 62 and 63, and an accounting.

[Then] Supreme Court Justice, Eugene M. Fahey, conducted a nonjury trial in June and July 2006 relative to the following question: "Was Plaintiff Frascogna a general partner in the [Frascogna Firm]?" (Doc. 349, p. 2; Fahey Decision, dated December 22, 2006; "Fahey Decision").

During the trial of the Frascogna Action, Capizzi testified regarding his status at the Frascogna Firm, prior to, and through Frascogna's resignation in April 2004. Capizzi testified that he was not a full equity partner; that he was merely an income partner, which is inconsistent with the position he takes in the instant...