Lawrence v. Kennedy

• Decision Date: 22 September 2011
• Citation: 936 N.Y.S.2d 487,2011 N.Y. Slip Op. 21377,34 Misc.3d 711
• Parties: Lawrence S. LAWRENCE, Plaintiff, v. Michael F. KENNEDY and Lawrence and Walsh, P.C., Defendants.
• Court: New York Supreme Court

2011 N.Y. Slip Op. 21377

34 Misc.3d 711

936 N.Y.S.2d 487

Lawrence S. LAWRENCE, Plaintiff,

v.Michael F. KENNEDY and Lawrence and Walsh, P.C., Defendants.

Supreme Court, Nassau County, New York.

Sept. 22, 2011.

Law Offices of Kenneth J. Weinstein, P.C., Garden City, for plaintiff.

Law Offices of Ira Bierman, Syosset, for defendants.

STEPHEN A. BUCARIA, J.

Motion pursuant to CPLR 3213 by plaintiff Lawrence S. Lawrence for summary judgment in lieu of complaint is denied.

Motion pursuant to CPLR 3211[a][1], [2],[3], [7] by co-defendant Michael F. Kennedy for an order dismissing the complaint insofar as interposed against him is granted.

Motion pursuant to CPLR 3211[a][1], [2],[3], [7] by co-defendant Lawrence and Walsh, P.C. for an order dismissing the complaint insofar as interposed against it is granted in part and denied in part.

Commencing in 1972, the now 70–year old plaintiff, Lawrence S. Lawrence, served as a founding partner and/or member of the defendant law firm, Lawrence and Walsh, P.C. [the “Firm”]. In 2008, however, the plaintiff and the Firm jointly agreed that the plaintiff would relinquish his status as a Firm member and/or principal. It was also agreed, however, that the plaintiff would retain his association therein by serving as an employee, in an “of counsel” capacity (Cmplt., ¶¶ 1–2, 4–5; S. Lawrence Aff., ¶¶ 4–5; Kennedy Aff., ¶ 7).

In early January of 2008, and after extensive negotiations (Kennedy Aff., ¶ 7), the parties executed two, related agreements which memorialized the plaintiff's transition from Firm principal/stockholder to employee; namely, a “Stock and Related Asset Purchase Agreement,” and a employment contract ( see, Bierman Aff., Exhs., “B,” “C”). In general, and pursuant to the key terms of the agreements, the plaintiff conveyed to the Firm, his 50% capital stock membership interest therein and the Firm then offered him employment spanning a four-and one-half year term, scheduled to terminate in June of 2012 (Agreement, § A; 1[a], [b]-[c]; § 3; Cmplt., ¶¶ 1–3; 6–7). Among other things, the parties' employment agreement provides that the plaintiff was to assume the “responsibilities, duties and authority” customarily associated with his “of counsel” position, and that he was to devote “substantially all of his business time, attention, expertise and efforts to the business and affairs of the Firm in the same manner as past practices” (Agreement § 1[c], [d] ).

With respect to compensation, the Firm agreed to pay the plaintiff an aggregate sum of $418,300.00 in fixed salary over the entirety of the contract term, to be paid in bi-weekly installments of $4,058.04. The plaintiff was also entitled to additional, performance-based salary amounts calculated in accord with a prescribed formula set forth in the agreement (Agreement, § 2, ¶ 1[c]; Cmplt.,¶¶ 8–9; 13–15). Significantly, the Agreement further provides that “for purposes of enforcement this [employment] Agreement and specifically section 2[b], shall be deemed an instrument for the payment of money, provided, however, that this provision shall not constitute a waiver of any defenses or counterclaims the Firm may have to enforcement of this provision” (Agreement, § 2, 1[c], at 5).

The Agreement authorizes the Firm to terminate the plaintiff “for cause” in the event of the plaintiff's “willful misconduct, breach of fiduciary duty or material negligence, or a material breach of the agreement and/or conviction of any crime resulting in disbarment or suspension from the practice of law (Agreement, § 3[a][[iii] ). Additionally, Firm could terminate the plaintiff's employment upon, inter alia, his death or disability for 90 days, in which case the Firm was to be responsible for accrued, performance-based salary earned up the date of termination, and fixed salary amounts “for the remainder of the Term * * * ”

(Agreement, §§ 3[a][i]-[v]; 4[a], at 10–12 see also, Agreement, § 8, at 16). With respect to defaults, the agreement states that in the event of a Firm default in paying fixed salary which remains uncured for a period exceeding 30 days, then the entire unpaid, fixed salary amount would—at the plaintiff's option—become immediately due and owing (Agreement, § 2[b], at 4).

Notably, paragraph 19 of the agreement states in part that the plaintiff “irrevocably waives” any right to enforce the agreement against any individual member of the firm, and that he similarly agreed to “look solely to the Firm for the enforcement of the liability and obligations contained in this agreement” (Agreement, § 19, at 21–22 see also, Stock Asset Purchase Agreement, § 11).

In September of 2010, plaintiff took a leave of absence to undergo heart surgery, but suffered a stroke shortly after the surgery was performed. The stroke left plaintiff neurologically unable to perform his employment duties (S. Lawrence Aff., ¶ 2; Cmplt., ¶¶ 2, 16). According to the Firm's managing member—co-defendant Michael F. Kennedy—plaintiff's daughter then came to the Firm's offices and informed Kennedy that the plaintiff would not be “returning to the practice” (Kennedy Aff., ¶¶ 12–13).

After plaintiff's daughter inquired of Kennedy about the Firm's obligations under the employment agreement, Kennedy responded by telling her that the Firm had “some real concerns and issues with respect to * * * [the plaintiff's] conduct,” which Kennedy claims he intended to discuss with the plaintiff upon his recovery. These concerns and issues were allegedly founded on “significant and serious claims” which the Firm had against the plaintiff—in sums purportedly exceeding any salary amounts the Firm might owe the plaintiff under the 2008 employment agreement (Kennedy Aff., ¶¶ 12–13).

With respect to those salary amounts, plaintiff claims that payments allegedly due from February of 2010 were already then outstanding and unpaid (Cmplt., ¶¶ 8–10, fn. 1, at 5). According to the plaintiff, the Firm terminated him in early January of 2011, and then failed to pay any further salary—fixed or otherwise—under the agreement (Cmplt., ¶¶ 17).

Thereafter, the plaintiff served a notice of default (Cmplt., ¶ 21), and when the payments allegedly due were still not forthcoming, he commenced the within action as against the Firm and Michael F. Kennedy, individually. The verified complaint, dated May 25, 2011, sets forth the facts as generally summarized above and interposes three, separately captioned causes of action. The first two causes of action allege in substance that the Firm and Kennedy willfully and with “gross negligence” disregarded and breached their contractual duties to pay both fixed and performance-based salary amounts (Cmplt., ¶¶ 20, 22–27; 28–33).

The third cause of action alleges, inter alia, that a fiduciary and/or “special” relationship existed between the plaintiff and the defendants and that the plaintiff is entitled to an accounting since Kennedy and the Firm have diverted the Firm's assets and receipts for their own personal use (Cmplt., ¶¶ 2–3; 6, 10). The complaint further avers that in order to avoid the waste of assets which would render a judgment ineffectual, the defendants should be restrained and enjoined from further dissipating the Firm's assets. Moreover, based on the above, the plaintiff seeks an accounting relating to “all sums” received by the defendants and spent “by them for travel * * * entertainment, referral fees and other perks and benefits * * * ” (Cmplt.,¶¶ 3, 9–10, 23–24; 34–35).

Notably, the record contains a short form, durable power of attorney which plaintiff executed in November of 2010 and which, inter alia, designates Sherry Lawrence, the plaintiff's wife, as his agent and attorney in fact (S. Lawrence Aff., Exh., “A” see also, S. Lawrence Reply Aff., ¶¶ 3–4)( see generally, General Obligations Law § 5–1501, et seq. ; In re Estate of Ferrara, 7 N.Y.3d 244, 251, 819 N.Y.S.2d 215, 852 N.E.2d 138 [2006] ).

Contemporaneously with the service of the above-described verified complaint, plaintiff separately moved pursuant to CPLR 3213, for summary judgment in lieu of complaint with respect to the “fixed” salary portion of the employment agreement. In so doing, the plaintiff relies in part on section 2[b] of the employment agreement, which provides that “for purposes of enforcement this Agreement and specifically section 2[b], shall be deemed an instrument for the payment of money, * * * ” ( see also, Cmplt.,¶¶ 11–12).

Defendants Michael F. Kennedy and the Firm have opposed the plaintiff's application pursuant to CPLR 3213 and separately cross moved—pre-answer—for dismissal of the plaintiff's verified complaint pursuant to CPLR 3211 [a] [1], [2], [3],[7].

Among other things, the movants contend that: (1) the power of attorney relied on by Sherry Lawrence is defective, and the plaintiff otherwise lacks capacity to commence and maintain the action; (2) section 19 of the employment agreement precludes enforcement of the contract against individual firm members, including managing member, Michael F. Kennedy; (3) there exists no fiduciary relationship between the defendants and the plaintiff and thus no accounting is warranted; and (4) the employment contract does not constitute an instrument for the “payment of money only” within the meaning of CPLR 3213 and, in any event, the Firm possesses a fraudulent inducement defense which warrants dismissal of the complaint as a matter of law.

Upon the papers submitted, the defendants' cross motions are granted to the extent indicated below. The motion for summary judgment in lieu of complaint is denied.

Although the plaintiff suffered a serious stroke in September of 2010, at this early “CPLR 3211 motion stage” of proceeding ( Held v. Kaufman, 91 N.Y.2d 425, 433, 671 N.Y.S.2d 429, 694 N.E.2d 430), there is lacking probative evidence from which it can be determinatively concluded that the plaintiff otherwise lacks capacity and competence in his own right to commence and maintain the subject action....