Kallista, S.A. v. White & Williams LLP

• Decision Date: 07 January 2016
• Citation: 27 N.Y.S.3d 332,51 Misc.3d 401
• Parties: KALLISTA, S.A., and Linda Gillette Parodi, Plaintiff, v. WHITE & WILLIAMS LLP, Randy Friedberg, and Does 1 Through 10, Defendants.
• Court: New York Supreme Court

51 Misc.3d 401
27 N.Y.S.3d 332

KALLISTA, S.A., and Linda Gillette Parodi, Plaintiff,
v.
WHITE & WILLIAMS LLP, Randy Friedberg, and Does 1 Through 10, Defendants.

Supreme Court, Westchester County, New York.

Jan. 7, 2016.

27 N.Y.S.3d 334

Law Offices of Daniel L. Abrams, PLLC By: Daniel L. Abrams, Esq., New York, Attorneys for Plaintiffs.

Matalon Shweky Elman PLLC By: Howard L. Elman, Esq., New York, Attorneys for Defendants.

27 N.Y.S.3d 335

ALAN D. SCHEINKMAN, J.

51 Misc.3d 403

Defendants White & Williams LLP ("White & Williams" or "Law Firm") and Randy Friedberg ("Friedberg") (collectively "Defendants") move, pursuant to CPLR 3211(a)(7), to dismiss: (1) the Second, Third and Fourth Causes of Action¹ of the Complaint; (2) the First Cause of Action as to "damage theories" and as to Plaintiff Linda Gillette Parodi ("Parodi"); and (3) the demands of both Parodi and co-Plaintiff Kallista, S.A. ("Kallista") (collectively "Plaintiffs") for punitive damages. Plaintiffs oppose all aspects of the motion.

This action arises out of claims that the Law Firm committed legal malpractice, and then fraudulently concealed its misconduct, in its representation of Kallista in relation to certain trademark registration applications. The action was commenced by the filing of the Summons and Complaint on August 4, 2015. Defendants moved to dismiss on October 2, 2015. This Court held a Preliminary Conference with counsel on October 16, 2015. Since the Court perceived that this motion would not result in the dismissal of all claims as against both Defendants, the Court directed that discovery proceed during the pendency of this motion. Discovery is scheduled to be completed by May 5, 2016 and a Trial Readiness Conference is scheduled for May 6, 2016. Plaintiffs submitted their opposition to the motion on October 30, 2015 and Defendants their reply on November 12, 2015. The motion was submitted for decision on November 13, 2016.

THE COMPLAINT

According to the Complaint, the allegations of which must be assumed as true for the purposes of this motion, Kallista is a Swiss corporation and has its principal place of business in Geneva (Affirmation of Howard I. Elman, Esq., dated October 2, 2015 ["Elman Aff."],

51 Misc.3d 404

Ex. 1, ¶ 4). Parodi is said to be a citizen of both Switzerland and the United States, residing in Switzerland (id. ¶ 5). The Law Firm is a Pennsylvania partnership and has maintained offices in Manhattan and in Pleasantville (id. ¶ 6). Friedberg is a member of the New York Bar, a resident of Scarsdale, and is a partner in the Law Firm's Manhattan office (id. ¶ 8).

Kallista was established in April 2012 to engage in the production and sale of skincare products. A sister company, Etheria, S.A. ("Etheria") was set up at the same time for the production and sale of hair care products. Both companies are managed by Parodi, and her husband, Pierre. Pierre is the owner of Kallista (id., ¶ 11).

Plaintiffs allege that, in late March and early April 2012, Kallista initially consulted with Friedberg regarding the preparation of a trademark application for the name "KALLISTA" for skincare products in the United States. Friedberg was also consulted regarding a trademark application for the name "ETHERIA") for hair care products in the United States (id. ¶ 12). On May 2, 2012, Kallista, Etheria, and the Law Firm entered into an agreement pursuant to which the Law Firm was to perform legal services for both companies, including the preparation and processing of the two trademarks (id. ¶ 13). In May 2012, Parodi was employed as a senior executive of Proctor & Gamble and Friedberg knew that she intended to leave that position as soon as the Kallista business was operational (id. ¶ 14).

Plaintiffs assert that, as early as November 2011, Kalliste Oraganics, Inc. ("Kalliste")

27 N.Y.S.3d 336

branded soap and skincare products which were sold throughout the United States under the name "KALLISTE". Plaintiffs say that a full and complete trademark search would have revealed the existence of the Kalliste product line (id. ¶¶ 15, 20). Despite this, on June 1, 2012, Friedberg reported to Kallista that his search of certain data bases indicated a low level of risk, that it was not necessary to do a full trademark search, and that he believed that the marks were available. On June 18, 2012, Kallista instructed Friedberg to proceed with registration for both marks (id. ¶ 16).

Plaintiffs assert that Defendants did not proceed with the trademark applications, even though they invoiced Kallista for the cost of the applications and falsely represented that the applications had been filed (id. ¶¶ 16–17). In February, 2013, Kallista asked Friedberg about the status of the applications and,

51 Misc.3d 405

in particular, as to whether Kallista products could be sold before the end of the summer and whether there was any risk. Friedberg allegedly advised that selling should start as soon as possible because the registration could not be finalized until that was done (id. ¶ 17). On July 24, 2013, Kallista wrote to Friedberg as to the status of the trademarks, noting that a regulatory agency had informed Kallista that the KALLISTA mark had not been registered. Friedberg is alleged to have responded by filing applications for both Etheria and Kallista that day (id. ¶ 18).

Plaintiffs allege that Defendants did not perform a trademark search of the United States Patent and Trademark Office ("USPTO") database and that, if such a search had been conducted, it would have been revealed that Kalliste Organics, Inc. ("Kalliste") had a trademark application for KALLISTE. Kalliste asserted in its application that it first used the KALLISTE mark in 2008. Registration of Kalliste's trademark was issued on October 15, 2013 (id. ¶ 20).

In September 2013, Parodi resigned from Proctor and Gamble, giving up a $250,000 annual salary and generous benefits (id. ¶ 21).

On November 15, 2013, Friedberg received an Office Action from USPTO stating that there was likelihood of confusion between the KALLISTE registration and the KALLISTA application, which were in the same class of products, and therefore the KALLISTA application was refused. Plaintiffs allege that Friedberg did not tell Kallista about this development and did not tell Kallista that the KALLISTE registration was a substantial legal threat to Kallista's business since the KALLISTA mark posed a serious risk of infringement on the KALLISTE mark (id. ¶ 22).

Kallista, allegedly unaware of any trademark issues, successfully launched a KALLISTA product line in the United States in January 2014 (id. ¶ 23). On May 15, 2014, Friedberg filed a petition with the United States Trademark Trial and Appeal Board (the "Board") to cancel the KALLISTE mark on the ground of fraud, and also filed a request to suspend the application for the KALLISTA mark. Friedberg is alleged to have taken these actions without informing Kallista or obtaining its consent (id. ¶ 24).

According to Plaintiffs, the petition to cancel was withdrawn after Kalliste threatened Rule 11 sanctions against Kallista. Friedberg then entered into negotiations with Kalliste for a coexistence agreement, which would

51 Misc.3d 406

have restricted the use of the KALLISTA mark to a small section of the relevant market. This was allegedly done without informing Kallista. Further, Friedberg sent a "harsh" and factually incorrect demand letter to Kalliste (id. ¶ 25).

27 N.Y.S.3d 337

On June 5, 2014, Defendants informed Kallista that the KALLISTA application was blocked by the KALLISTE trademark registration and recommended that the dispute be resolved through a coexistence agreement. In early July 2014, Friedberg informed Kallista that the Law Firm would give it a credit for up to $7500 of the costs of a coexistence agreement and apologized for "miscommunication" (id. ¶ 26). Subsequent efforts to negotiate a coexistence agreement failed.

On August 5, 2014, the Law Firm was relieved of further services by Kallista.

Kallista alleges that, in view of its inability to trademark the KALLISTA mark, it closed its business. Its distributors returned tens of thousands of dollars of KALLISTA products which cannot be sold. Kallista claims it invested over $900,000 in its business operations, which are not recoverable, and lost profits of more than $350,000 for 2014, 2015 and 2016. Parodi claims she lost income of at least $217,000 (id. ¶¶ 29–30).

The First Cause of Action is for legal malpractice and is asserted by both Plaintiffs as against both Defendants. It is alleged that Defendants breached a duty of care and skill by, among other things: failing to conduct an adequate trademark search in May 2012; failing to file and prosecute the KALLISTA trademark application in June 2012; failing to inquire into the status of the application and telling Kallista to proceed...