Dempster v. Liotti

• Decision Date: 24 May 2011
• Citation: 86 A.D.3d 169,924 N.Y.S.2d 484,2011 N.Y. Slip Op. 04408
• Parties: Madeline DEMPSTER, respondent-appellant,v.Thomas F. LIOTTI, appellant-respondent.
• Court: New York Supreme Court — Appellate Division

86 A.D.3d 169
924 N.Y.S.2d 484
2011 N.Y. Slip Op. 04408

Madeline DEMPSTER, respondent-appellant,
v.
Thomas F. LIOTTI, appellant-respondent.

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

May 24, 2011.

[924 N.Y.S.2d 485]

APPEAL by the defendant, in an action to recover damages for legal malpractice and breach of contract, as limited by his notice of appeal and brief, from so much of (1) an order of the Supreme Court (Randy Sue Marber, J.) dated March 31, 2009, and entered in Nassau County, as denied those branches of his motion which were to dismiss the cause of action to recover damages for legal malpractice pursuant to CPLR 3211(a)(7), or, in the alternative, for summary judgment dismissing that cause of action, and (2) an order of the same court entered August 14, 2009, as denied that branch of his motion which was for leave to reargue that branch of his prior motion which was for summary judgment dismissing the cause of action to recover damages for legal malpractice, and CROSS APPEAL by the plaintiff, as limited by her notice of cross appeal and brief, from so much of the order dated March 31, 2009, as denied that branch of her cross motion which was for summary judgment on her cause of action to recover damages for breach of contract, and, upon searching the record, awarded summary judgment to the defendant dismissing the cause of action to recover damages for breach of contract pursuant to CPLR 3212(b). Justice Rivera has been substituted for the late Justice Fisher (see 22 NYCRR 670.1[c] ).Thomas F. Liotti, Garden City, N.Y. (Jennifer L. McCann of counsel), appellant-respondent pro se.Lester D. Janoff, Melville, N.Y., for respondent-appellant.WILLIAM F. MASTRO, J.P., REINALDO E. RIVERA, JOHN M. LEVENTHAL, and ARIEL E. BELEN, JJ.BELEN, J.

[86 A.D.3d 171] We are asked to consider whether an attorney who failed to oppose a motion to dismiss the complaint in an action underlying a legal malpractice action, and thereafter failed to file a timely notice of appeal from the order that granted the motion to dismiss, is entitled, under the facts of this case, to summary judgment dismissing the legal malpractice cause of action on the ground that such negligence did not proximately cause the dismissal of the underlying action. Here, we conclude that, since the underlying action was time-barred as a matter of law, the attorney's negligence, although clearly inexcusable, was not a proximate cause of the plaintiff's alleged injuries, and accordingly this malpractice action must be dismissed.

The plaintiff, Madeline Dempster, was involved in a contentious divorce proceeding with her former husband, George Dempster. On or about May 22, 1992, after five years of litigation in the Supreme Court, Nassau County, Mrs. Dempster obtained a judgment of divorce. In the 10 years that followed, however, Mr. Dempster frustrated her ability to enforce the money judgments representing her equitable

[924 N.Y.S.2d 486]

share of the marital assets—an amount that eventually totaled over $3,500,000—through a series of alleged fraudulent conveyances in which he was represented by his attorneys Shaw, Licitra, Bohner, Esernio, Schwartz & Pfluger, P.C. (hereinafter the Shaw Firm).

As an example, on June 27, 1995, Mr. Dempster created a corporation named Overview Equities, Inc. (hereinafter Overview). Two days later, on June 29, 1995, Mr. Dempster transferred title of a marital residence to Overview for no consideration. Subsequently, in August 1995, Mr. Dempster executed confessed judgments in favor of two other closely held corporations under his control, Island Helicopter Leasing Corp. (hereinafter Island) and Rio Manufacturing (hereinafter Rio), for amounts collectively totaling approximately $1,500,000.

[86 A.D.3d 172] On August 15, 1997, Mrs. Dempster commenced an action in the Supreme Court, Nassau County, against Mr. Dempster, Overview, Island, and Rio seeking, inter alia, to set aside Mr. Dempster's conveyance of the subject residence to Overview as fraudulent pursuant to the Debtor and Creditor Law (hereinafter the fraudulent conveyance action). On April 14, 1999, five days before the trial in the fraudulent conveyance action was scheduled to begin, Overview filed for bankruptcy in the United States Bankruptcy Court for the Eastern District of New York (hereinafter the Bankruptcy Court), listing the Dempsters' marital residence as an asset of Overview, and Island and Rio as Overview's creditors. The subject residence was sold, and the net proceeds of such sale, totaling over $1,000,000, were placed in escrow. Mrs. Dempster subsequently filed a claim against Overview's bankruptcy estate and moved to vacate an automatic stay of the bankruptcy proceedings. The Bankruptcy Court determined that Mrs. Dempster had standing as a “party in interest” to the bankruptcy proceedings, and granted her motion to vacate the automatic stay as it related to her fraudulent conveyance action.

In the fraudulent conveyance action, Mrs. Dempster moved for summary judgment in her favor on her causes of action to recover damages based on the alleged fraudulent conveyance of the marital residence to Overview pursuant to Debtor and Creditor Law §§ 273–a and 276. In an order dated August 15, 2002, the Supreme Court granted Mrs. Dempster's motion. Rio and Island appealed from the order, and this Court affirmed ( see Dempster v. Overview Equities, 4 A.D.3d 495, 773 N.Y.S.2d 71). This Court concluded that the plaintiff established, prima facie, her entitlement to judgment as a matter of law on her cause of action pursuant to Debtor and Creditor Law § 273–a by proving that Mr. Dempster's conveyance of the marital residence to Overview was made without fair consideration, that a judgment was docketed against Mr. Dempster, and that Mr. Dempster failed to satisfy the judgment ( id. at 497, 773 N.Y.S.2d 71). We also agreed with the Supreme Court that Rio and Island, in opposition, failed to raise a triable issue of fact since, even if the confessed judgments that Overview executed in favor of Rio and Island were valid, they did not constitute fair consideration for the transfer because the confessed judgments had expired by that time and, thus, were unenforceable ( id.).

This Court also determined that Mrs. Dempster established, prima facie, her entitlement to judgment as a matter of law on [86 A.D.3d 173] her causes of action pursuant to Debtor and Creditor Law § 276, by submitting evidence demonstrating that Mr. Dempster's conduct in transferring the marital residence to Overview “[was] replete with ‘badges of fraud,’ ” namely, that Overview

[924 N.Y.S.2d 487]

was created only two days before the transfer, the transfer was made just before the trial was scheduled to begin, the trial could have rendered the residence a valid target of equitable distribution, and Overview operated out of the same address as Mr. Dempster's other business concerns ( Dempster v. Overview Equities, 4 A.D.3d at 498, 773 N.Y.S.2d 71). In opposition, Rio and Island failed to raise a triable issue of fact ( id.).

Sometime in 2002, while the appeal in the fraudulent conveyance action was pending before this Court, Mrs. Dempster's attorneys in the fraudulent conveyance action referred her to Thomas F. Liotti, the defendant herein. At the time, Mrs. Dempster's attempts to enforce the judgments she had obtained against Mr. Dempster in the divorce action had been unsuccessful. According to Mrs. Dempster, Liotti advised her that she had a strong case for recovering damages based on violations of the federal Racketeering Influenced and Corrupt Organizations Act (hereinafter RICO) ( see 18 USC §§ 1962, et seq.) by Mr. Dempster and the Shaw Firm (hereinafter together the RICO defendants). Pursuant to a retainer agreement executed by both Liotti and Mrs. Dempster, on May 7, 2003, Liotti commenced an action (hereinafter the RICO action), on Mrs. Dempster's behalf, against the RICO defendants in the United States District Court for the Eastern District of New York (hereinafter the District Court). The complaint alleged that the RICO defendants committed fraud, aided and abetted fraud, and committed civil RICO violations predicated upon multiple acts of mail and wire fraud. Soon after, the RICO defendants moved to dismiss the complaint pursuant to Federal Rules of Civil Procedure rules 12(b)(1), 12(b)(6), and 9(a).

The District Court, in a decision dated March 31, 2004, granted the RICO defendants' motion to dismiss the complaint in the RICO action without prejudice. The District Court held that: (1) the complaint failed to establish the existence of a RICO enterprise because it did not support the claim that the RICO defendants conspired toward a “common purpose or mutual course of conduct;” (2) even if a RICO enterprise were established, the complaint failed to establish that the Shaw firm actually participated in the alleged racketeering activity, rather than merely providing professional legal services to Mr. Dempster[86 A.D.3d 174] ; and (3) the RICO defendants' acts of alleged mail and wire fraud were not pleaded with sufficient specificity to adequately establish “racketeering activity.”

Subsequently, on May 12, 2004, Liotti filed an amended complaint on Mrs. Dempster's behalf, which purported to cure the defects that led to the dismissal of the original complaint. The RICO defendants moved to dismiss the amended complaint pursuant to Federal Rules of Civil Procedure rules 12(b)(1), 12(b)(6), and 9(a). This time, despite receiving two extensions of time to submit the opposition to the motion, Liotti failed to file timely opposition on Mrs. Dempster's behalf to the RICO defendants' motion to dismiss. Ultimately, Liotti made a motion pursuant to Federal Rules of Civil Procedure rule 6(b) to compel the RICO defendants to accept Mrs. Dempster's late opposition papers, asserting that he had been unable to timely submit the opposition papers because of, inter alia, a strong...