First Mercury Ins. Co. v. D'Amato & Lynch, LLP
| Decision Date | 17 August 2020 |
| Docket Number | Index No. 159185/2019 |
| Citation | 2020 NY Slip Op 32725 (U) |
| Court | New York Supreme Court |
| Parties | FIRST MERCURY INSURANCE COMPANY, acting through its agent, RIVERSTONE CLAIMS MANAGEMENT, LLC, Plaintiff v. D'AMATO & LYNCH, LLP, LUKE LYNCH JR., ESQ., ARTURO BOUNTIN, ESQ., MICHAEL HAIG, DAVID BOYAR, ROBERT LANG, John Does 1-20, and Jane Does 1-10, Defendants |
DECISION AND ORDER
I. PLAINTIFF'S MOTION FOR A DEFAULT JUDGMENT AGAINST DEFENDANT D'AMATO & LYNCH
Plaintiff moves for a default judgment on the liability of defendant D'Amato & Lynch, LLP, a law firm, which entered an Engagement Agreement with plaintiff's agent Riverstone Claims Management, LLC, to represent plaintiff's insurance policyholders in defending litigation against them. The Engagement Agreement appointed D'Amato & Lynch the national coordinating counsel (NCC) for Riverstone Claims Management and plaintiff.
Plaintiff establishes that in one action that D'Amato & Lynch handled, Cox v. Linco Restoration Corp., a D'Amato & Lynch attorney advised plaintiff that the action was settled for $1,000,000 to be paid by plaintiff. Plaintiff issued a check for that amount to "D'Amato & Lynch LLP Trust Account," Aff. of Andrew Lavoott Bluestone (Oct. 24, 2019) Ex. A (V. Corapl.) ¶ 20, to be held pending disbursement to the settling plaintiff, but D'Amato & Lynch deposited the check in the firm's operating account, where the firm used the funds for purposes other than to pay the plaintiff in settlement of the Cox action. Plaintiff in this action claims the firm's professional negligence, breach of fiduciary duty, conversion, fraudulent conveyance, unjust enrichment, violation of New York Judiciary Law § 487, and violation of the Rules of Professional Conduct, which is not a claim this court may adjudicate. N.Y. Jud. Law § 90; Shapiro v. McNeil, 92 N.Y.2d 91, 97 (1998); Suttongate Holdings Ltd. v. Laconm Mgt. N.V., 173 A.D.3d 618, 619 (1st Dep't 2019); Cohen v. Kachroo, 115 A.D.3d 512, 513 (1st Dep't 2014); Art Capital Group, LLC v. Neuhaus, 70 A.D.3d 605, 607 (1st Dep't 2010).
Plaintiff admits that § VII(F) of the Engagement Agreement with D'Amato & Lynch provides for mediation and arbitration of disputes between the parties, but insists that the dispute over the $1,000,000 payment is an "Extra-Contractual Obligation or Loss" defined in § V(G)(3) of the Engagement Agreement and not subject to alternative dispute resolution. Plaintiff fails to present the Engagement Agreement, however, so plaintiff's allegations regarding the agreement's contents and its exclusion of the dispute over the $1,000,000 payment from mediation andarbitration are hearsay. People v. Joseph, 86 N.Y.2d 565, 570 (1995); Shanmugam v. SCI Eng'g, P.C., 122 A.D.3d 437, 438 (1st Dep't 2014). See B.P. AC Corp. v. One Beacon Ins. Group, 8 N.Y.3d 708, 716 (2007); Williams v. Esor Realty Co., 117 A.D.3d 480, 480-81 (1st Dep't 2014).
Plaintiff served the summons and complaint on D'Amato & Lynch by delivery to the State Secretary of State September 23, 2019, giving D'Amato & Lynch until October 23, 2019, to answer. C.P.L.R. § 3012(c). In opposition to plaintiff's motion, D'Amato & Lynch explains that it advised its insurer when the firm was served and expected the insurer to defend the action. When the insurer denied a defense several weeks later, the D'Amato & Lynch retained defendant Lynch's attorney, who on October 28, 2019, five days late, filed a Notice of Appearance for the firm and requested from plaintiff an extension of time to respond to the complaint. Plaintiff refused unless D'Amato & Lynch answered rather than responded to the complaint with a motion. Since D'Amato & Lynch intended to move to compel alternative dispute resolution under the Engagement Agreement, D'Amato & Lynch proceeded with that motion. On November 1, 2019, plaintiff and both defendants D'Amato & Lynch and Lynch stipulated to extend these defendants' time to oppose plaintiff's motion for a default judgment against D'Amato & Lynch and to move to compel alternative dispute resolution until November 12, 2019.
In opposition to plaintiff's motion, D'Amato & Lynch also presents the parties' Engagement Agreement, which Lynch authenticates. Section VII(F) provides that:
If any dispute arises between Riverstone and NCC with respect to this Engagement Agreement which the parties are unable to resolve by negotiation within fifteen (15) days of written notice by any party to the others, the parties agree that the dispute will be submitted to mediation in California before a professional mediator. If the dispute is not resolved within thirty (3 0) days after submission to mediation, any party may submit the matter for final binding resolution by arbitration.
Aff. of Luke D. Lynch, Jr. (Nov. 12, 2019), Ex. B (emphases added). The parties' dispute over the $1,000,000 payment arises from and relates to D'Amato & Lynch's performance of its services under the Engagement Agreement. Shapiro v. Sankarsingh, 178 A.D.3d 484, 485 (1st Dep't 2019); Minogue v. Malhan, 178 A.D.3d 447, 448 (1st Dep't 2019); DS-Concept Trade Inv. LLC v. Wear First Sportswear, Inc., 128 A.D.3d 585, 585 (1st Dep't 2015); BRG Sports, LLC v. Zimmerman, 127 A.D.3d 499, 499 (1st Dep't 2015). In fact, even if, as plaintiff maintains, this dispute is over which party's actions are responsible for "Extra Contractual Obligations . . . or Loss in Excess of Policy Obligations," § V(G)(3) provides that such a dispute "shall be resolved pursuant to Section VII.F." Id. Since plaintiff fails to establish that its claim for the $1,000,000 in settlement funds is not subject to mandatory mediation and arbitration under the parties' Engagement Agreement, the court denies plaintiff's motion for adefault judgment against D'Amato & Lynch. C.P.L.R. § 3215(f); Manhattan Telecom Corp. v. H & A Locksmith, Inc., 21 N.Y.3d 200, 203 (2013); Martinez v. Reiner, 104 A.D.3d 477, 478 (1st Dep't 2013); Giordano v. Brenhouse, 45 A.D.3d 416, 417 (1st Dep't 2007).
II. PLAINTIFF'S MOTION FOR A CONSTRUCTIVE TRUST ON THE PROPERTY OF DEFENDANTS D'AMATO & LYNCH AND LYNCH
Plaintiff also moves for a constructive trust on the real and personal property of D'Amato & Lynch and of Lynch as the firm's sole general partner and the sole signatory on the firm's escrow accounts. To be entitled to an equitable interest in defendants' real or personal property, plaintiff must show that D'Amato & Lynch or Lynch has misappropriated the $1,000,000 payment to acquire real or personal property for the firm's or Lynch's own benefit, and that property is at risk of being removed from New York, lost, or destroyed. Homapour v. Harounian, 182 A.D.3d 426, 427-28 (1st Dep't 2020); Estate of Calderwood v. ACE Group Lntl. LLC, 157 A.D.3d 190, 199 (1st Dep't 2017).
Plaintiff nowhere alleges that D'Amato & Lynch or Lynch used the $1,000,000 deposited in the firm's operating account to acquire identifiable real or personal or real property. Moreover, the only evidence plaintiff presents to show that any of defendants' property will be removed from New York, lost, destroyed, or otherwise rendered inaccessible or worthless is anuncertified, unverified complaint against D'Amato & Lynch by its landlord for rent; an inadmissible news article about that lawsuit, People v. Samandarov, 13 N.Y.3d 433, 437 (2009); Rodriguez v. City of New York, 105 A.D.3d 623, 624 (1st Dep't 2013); and unsworn correspondence by Riverstone Claims Management. The correspondence recites D'Amato & Lynch's notification to Riverstone Claims Management "that the firm was withdrawing from working on litigated claims" and "would be unable to perform any substantive work on any files after June 14, 2019." Aff. of Andrew Lavoott Bluestone (Nov. 11, 2019) Ex. C, at 1. While this notification may raise an inference that the firm was winding down its business and thus qualify as an admission that is an exception to the rule against hearsay, no foundation is laid for the admissibility of the first layer of hearsay, the correspondence itself, as a business record or other exception to the rule against hearsay. E.g., C.P.L.R. § 4518(a); People v. Bell, 153 A.D.3d 401, 412 (1st Dep't 2017); Wells Fargo Bank, N.A. v. Jones, 139 A.D.3d 520, 521 (1st Dep't 2016); Matter of Ramel Anthony S., 124 A.D.3d 445, 445 (1st Dep't 2015); Taylor v. One Bryant Park, LLC, 94 A.D.3d 415, 415 (1st Dep't 2012).
Nor does the complaint allege the factual basis for a constructive trust or even seek such relief, which would ensue at the conclusion of the action, where plaintiff is without the legal remedy of damages that plaintiff claims here. Simonds v.Simonds, 45 N.Y.2d 233, 242-43 (1978); AQ Asset Mgt. LLC v. Levine, 154 A.D.3d 430, 431 (1st Dep't 2017). Plaintiff's motion is in effect a motion for summary judgment on an unpleaded claim, Quik Park W. 57 LLC v. Bridgewater Operating Corp., 148 A.D.3d 444, 445 (1st Dep't 2017); Burgos-Lugo v. City of New York, 146 A.D.3d 660, 662 n.3 (1st Dep't 2017); Pludeman v. Northern Leasing Sys., Inc., 106 A.D.3d 612, 616 (1st Dep't 2013), which is also premature before defendants have answered. C.P.L.R. § 3212(a); City of Rochester v. Chiarella, 65 N.Y.2d 92, 101 (1985); Stone Column Trading House Ltd. v. Beogradska Banka A.D., 139 A.D.3d 577, 578 (1st Dep't 2016); Ruotolo v. Mussman & Northey, 105 A.D.3d 591, 593 (1st Dep't 2013); Drezin v. New Yankee Stadium Community Benefits Fund, Inc., 94 A.D.3d 542, 543 (1st Dep't 2012).
Moreover, defendants have shown that the Engagement Agreement requires that the claims in this action be resolved through mediation or arbitration, depriving this court of the authority to grant relief based on those claims, even if the grounds for a constructive trust were pleaded and a constructive trust sought in the complaint. Defendants' dispute over the $1,000,000 payment stems from their claim against plaintiff for its prior repudiation of...
To continue reading
Request your trial