Hoffenberg v. Hoffman & Pollok

• Decision Date: 05 March 2003
• Docket Number: No. 00 Civ. 3151(RWS).,00 Civ. 3151(RWS).
• Citation: 248 F.Supp.2d 303
• Parties: Steven Jude HOFFENBERG, Plaintiff, v. HOFFMAN & POLLOK, Defendant.
• Court: U.S. District Court — Southern District of New York

248 F.Supp.2d 303

Steven Jude HOFFENBERG, Plaintiff, v. HOFFMAN & POLLOK, Defendant.

No. 00 Civ. 3151(RWS).

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

March 5, 2003.

Steven Jude Hoffenberg, Ayer, MA, Plaintiff pro se.

Hoffman Pollok & Pickholz, New York, NY (John L. Pollok, of counsel), for defendant.

OPINION

SWEET, District Judge.

Defendant Hoffman & Pollok, now known as Hoffman Pollok & Pickholz LLP ("HPP") has moved pursuant to Rule 12(b)6 to dismiss the complaint of pro se plaintiff Steven Jude Hoffenberg ("Hoffenberg") alleging fraud and malpractice against HPP, his former law firm. For the reasons set forth below, the motion is granted.

Prior Proceedings

Hoffenberg filed his complaint on April 25, 2000, alleging diversity jurisdiction arising out of his incarceration in the Federal Correctional Institute in Bradford, Pennsylvania.

Giving the complaint a fair reading, it appears that it alleges first that HPP issued fraudulent billing to him for services that were never provided (Compl. at ¶¶ 16, 43-49); second that HPP fraudulently induced Hoffenberg to "write a letter about the over one million dollars advanced to HP by Pro Se," which appears to refer to a letter dated May 29, 1996 in which Hoffenberg released all claims he had against HPP. Id. at ¶ 18; third, that HPP committed malpractice and breached their fiduciary duty not only throughout the course of HPP's representation of Hoffenberg, Id, at ¶ 41, but also in connection with the monies set aside for legal services by a consent judgment entered against Hoffenberg. The complaint alleges that HPP took a $450,000 set aside from a third party and colluded with a third party, forcing Hoffenberg to enter into an adverse agreement for HPP's benefit. Id. at ¶¶ 19-42.

On September 9, 2001, Hoffenberg was granted an additional forty-five days to serve HPP. A letter from HPP of June 13, 2000 acknowledging receipt of a complaint from Hoffenberg was addressed to the judge to whom the action had previously been assigned. An affidavit of service dated in June 2000, was received on October 3, 2001. On November 14, 2001, the action was dismissed in error as a result of overlooking the recently received June 2000 affidavit. On May 14, 2002, the Second Circuit vacated the dismissal and remanded the case to consider whether service was proper. Hoffenberg v. Hoffman Pollok & Pickholz, LLP, No. 01-9427, 34 Fed. Appx. 18 (2d Cir.2002). HPP in its instant motion acknowledges the efficacy of service. On May 20, 2002, Hoffenberg filed a motion to recuse this Court which was denied on October 30, 2002.

Hoffenberg has been a party to actions in this district since February 1993 when the Securities and Exchange Commission ("SEC") commenced a civil action against him and others. SEC v. Towers Fin. Corp., No. 93 CIV. 0744(WK)(AJP), 1996 WL 406685, at *1 (S.D.N.Y. Mar. 26, 1996). Hoffenberg was formerly Chief Executive Officer ("CEO") and Chairman of the Board of Towers Financial Corporation ("Towers"). Towers filed for bankruptcy in March 1993. In October 1994, the Bankruptcy Trustee for Towers obtained a civil judgment against Hoffenberg and other officers of Towers on consent in the amount of $400,000,000, plus a separate judgment in the amount of $8,050,000.

On February 17, 1993, Hoffenberg and others agreed to a preliminary injunction in the SEC action that enjoined him from dissipating assets, exempting Hoffenberg's living expenses and reasonable attorney's fees. In October 1994, the SEC obtained a final judgment against Hoffenberg incorporating the terms of the 1993 asset freeze.

A criminal action was commenced against Hoffenberg and others for conspiracy during 1991 and 1992 to obstruct the SEC's investigation, United States v. Hoffenberg, Nos. 94 Cr. 213(RWS), 95 Cr. 321 (RWS), 1997 WL 96563, at *6 (S.D.N.Y. Mar. 5, 1997). Hoffenberg pled guilty on April 20, 1995 to five criminal counts: (1) conspiracy to violate the securities laws by fraudulently selling securities; (2) mail fraud; (3) conspiracy to obstruct justice; (4) tax evasion; and (5) mail and wire fraud. His motion to withdraw this plea was subsequently denied. United States v. Hoffenberg, 169 F.R.D. 267, 268 (S.D.N.Y.1996). He received a sentence of 240 months in prison and was required to make restitution of $475,157,340, a judgment which was affirmed. United States v. Hoffenberg, 164 F.3d 620, 1998 WL 695933 (2d Cir.1998).

In December 1999, Hoffenberg, having sought a review of his conviction under 28 U.S.C. § 2255, filed a motion to recuse this Court on the basis of a conflict of interest, which was denied as was the petition for review. Hoffenberg v. United States, 2000 WL 1523142, at *1 (S.D.N.Y. Oct.13, 2000). The Honorable Thomas P. Griesa, in reviewing Hoffenberg's § 2255 motion, held that the "motion raised no constitutional grounds for attacking Hoffenberg's criminal convictions that could properly be construed as a § 2255 motion." Id. (citing Hoffenberg v. United States, No. 00 Civ. 1686(TPG) (S.D.N.Y. March 6, 2000)). On August 8, 2000, Hoffenberg filed another recusal motion in connection with his effort to review his convictions under 28 U.S.C. §§ 144, 455, which was denied on October 13, 2000. The court directed that "any appeal from this order, or from my order of January 28, 2000 denying his prior recusal motion, would not be taken in good faith." Hoffenberg, 2000 WL 1523142, at *3.

In December 2000, Hoffenberg filed a legal malpractice action against Daniel Meyers, a court-appointed attorney who represented Hoffenberg from April 1996 to March 1997, following HPP's withdrawal. The action alleged that Meyers had failed to achieve a withdrawal of Hoffenberg's guilty plea and to challenge the prior $450,000 set aside in favor of HPP which was contained in the consent judgment. Hoffenberg v. Meyers, No. 99 CIV. 4674 RWS, 2002 WL 57252, at *1. Meyers' motion for summary judgment dismissing Hoffenberg's amended complaint was granted on January 16, 2002.

Background

The following recital of background facts are gleaned from the court proceedings and the submissions of HPP and do not constitute findings of fact relied upon in the substantive discussion which follows this section.

On April 19, 1993, Hoffenberg executed a formal retainer agreement with HPP, for the purposes of his representation in both pending and future civil and criminal matters against him. Since Hoffenberg's assets had been frozen by the SEC, the funding of the retainer was subject to SEC approval which was granted.

During the first quarter of 1994, the initial retainer had been exhausted. HPP's predecessor then made an application to the SEC for the payment of additional funds by notice sent which contained the details of the legal services provided with worksheets and time slips. Payment was approved.

On October 25, 1994, Hoffenberg consented to entry of a final judgment against him and various entities he controlled with the Towers Trustee. The consent judgment was a product of negotiations between Hoffenberg and his counsel, HPP, the Trustee, counsel for the Trustee and the SEC. It provided that the defendants named, including Hoffenberg and Towers, agreed to pay $400,000,000 to the creditors of Towers, which represented the losses resulting from Hoffenberg's fraud, ultimately found to be $475,157,340. The consent judgment also provided that prejudgment interest of $108,000,000, which constituted a portion of the funds restrained by the SEC, be transferred to the Trustee in partial satisfaction of the $400,000,000 judgment. The transfer of these funds to the Trustee was subject to approval by the SEC.

Under the terms of the consent judgment, HPP received $450,000 to be held in escrow for legal services, which were subsequently to be provided (the "Set Aside"). (Consent J. Against Steven Hoffenberg and TFC Mgmt., No. 94-8055A at ¶ V (Oct. 25, 1994).) Part V of the consent judgment stated:

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the Trustee shall transfer $450,000 to two interest-bearing Accounts at Republic National Bank with the law firm of Hoffman & Pollok, as signatories, $200,000 to one account ("Account A") and $250,000 to the other account ("Account B"). Both accounts A and B shall be used solely for providing legal services to Hoffenberg by Hoffman & Pollok, and any amounts not spent on fees for legal services actually rendered shall be remitted to the Trustee. Funds in Account A may be used for legal representation (including attorneys' fees and expenses) of Hoffenberg in any criminal actions now pending against him. Hoffman & Pollok shall remit to the Trustee any unspent funds in Account B, plus related interest, within thirty (30) business days after the completion of all legal representation now pending against him in the Southern District of New York and the Northern District of Illinois. Hoffman & Pollok shall remit to the Trustee any unspent funds from Account A within ten days after the termination of all civil litigation or twenty-four (24) months from the execution of this Agreement whichever is earlier.

Hoffman & Pollok shall provide the Trustee with monthly statements from the Accounts, along with Hoffman & Pollok's monthly invoices for legal services rendered to Hoffenberg. If the necessity arises, funds may be transferred from Account A to Account B and/or Account B to Account A.

The Trustee shall review for reasonableness the monthly invoices within five (5) business days of receipt from Hoffman & Pollok and approve the invoices, in writing, in whole or in part.

Hoffman & Pollok shall withdraw funds from the account and/or transfer

funds between accounts only upon written authorization of the Trustee, but the Trustee shall not unreasonably withhold his authorization. Any and all disputes as to the reasonableness of any invoices shall be adjudicated by the United States Bankruptcy Court for the Southern District of New York.

Hoffenberg waived any right to appeal...