Loughlin v. Meghji
| Decision Date | 30 September 2020 |
| Docket Number | 2016-11544,2018-00518,2018-01235 |
| Citation | 132 N.Y.S.3d 65,186 A.D.3d 1633 |
| Parties | James J. LOUGHLIN, Jr., respondent-appellant, v. Mohsin Y. MEGHJI, appellant-respondent. |
| Court | New York Supreme Court — Appellate Division |
DECISION & ORDER
In an action, inter alia, to recover damages for breach of a restrictive covenant, (1) the defendant appeals from an order of the Supreme Court, Nassau County (Stephen A. Bucaria, J.), entered October 13, 2016, (2) the defendant appeals, and the plaintiff cross-appeals, from a judgment of the same court entered December 4, 2017, and (3) the defendant appeals, and the plaintiff cross-appeals, from an amended judgment of the same court entered December 21, 2017. The order denied the defendant's motion for summary judgment dismissing the complaint and on his counterclaim. The judgment and the amended judgment, insofar as appealed from, upon the order entered October 13, 2016, and upon decisions of the same court entered August 22, 2017, and November 14, 2017, respectively, made after a nonjury trial, awarded the plaintiff damages in the principal sum of $825,000 and attorneys' fees in the principal sum of $755,160. The judgment and the amended judgment, insofar as cross-appealed from, awarded the plaintiff damages in the principal sum of only $825,000 and attorneys' fees in the principal sum of only $755,160.
Motion by the plaintiff to dismiss the appeal from the order on the ground that the right of direct appeal terminated upon the entry of the amended judgment. By decision and order on motion of this Court dated April 4, 2018, the motion was held in abeyance and referred to the panel of Justices hearing the appeals and cross appeals for determination upon the argument or submission thereof.
ORDERED that one bill of costs is awarded to the plaintiff.
The appeal from the order must be dismissed because the right of direct appeal therefrom terminated with the entry of the judgment in the action (see Matter of Aho, 39 N.Y.2d 241, 248, 383 N.Y.S.2d 285, 347 N.E.2d 647 ). The issues raised on the appeal from the order are brought up for review and have been considered on the defendant's appeal from the amended judgment (see CPLR 5501[a][1] ).
In 2002, the plaintiff and the defendant formed Loughlin Meghji & Co. Associates, Inc. (hereinafter the Corporation), a consulting firm, in which each held a 50% interest. They also formed Loughlin Meghji Investments, LLC (hereinafter the LLC), an investment company, in which they were each 50% members. On October 14, 2011, the plaintiff and the defendant entered into an "Agreement of Purchase and Sale of Stock" (hereinafter the PSA) wherein the plaintiff purchased the defendant's shares of the Corporation and membership interest in the LLC for $7.5 million.
Pursuant to paragraph 9.1.1 of the PSA, for a two-year period, the defendant was restricted from "engag[ing] in the business of providing consulting services in connection with corporate restructurings for his own account or otherwise engag[ing] in business activities that directly or indirectly compete[d] with the business of the Corporation as of May 10, 2011." This provision also stated that: "Notwithstanding anything else in this paragraph 9.1 to the contrary, this restriction on competition is not intended to and does not restrict [the defendant] from engaging in any activities that, as of May 10, 2011, do not constitute a part of the business of the Corporation, or that at the time such activities are undertaken by [the defendant], do not compete with the business of the Corporation as of such time."
Paragraph 9.2 provided that, for that same two-year period, the defendant was restrained from "contact[ing] any customer ... of the Corporation for the purpose of soliciting or diverting any such customer ... or any of their respective business, from the Corporation."
Paragraph 10.11 provided that, in the event that litigation was commenced arising out of the PSA, that, "the substantially prevailing party shall be entitled to an award of the costs and expenses of such litigation, including two times reasonable attorneys' fees."
In January 2012, Springleaf Finance, Inc. (hereinafter Springleaf), a company then primarily in the business of issuing subprime loans to consumers, hired the defendant as an executive vice president and head of strategy and corporate development. The defendant was employed by Springleaf until February 28, 2014.
In December 2014, the plaintiff commenced this action against the defendant to recover damages resulting from the defendant's breach of the non-solicitation covenant as the first cause of action, to recover damages for the defendant's breach of the covenant not to compete as the second cause of action, and to recover his attorneys' fees pursuant to paragraph 10.11 of the PSA as the third cause of action. The plaintiff alleged that the Corporation and its successor "was and is in the business of providing consulting services in connection with corporate restructurings." The plaintiff further alleged that the defendant violated the restrictive covenants by accepting employment with Springleaf, whose chief executive officer, Jay Levine, had previously been the chief executive officer of one of the Corporation's former customers, Capmark Financial Group, Inc. (hereinafter Capmark), since the defendant allegedly was responsible for advising Springleaf as to corporate restructuring. In his answer, the defendant interposed a counterclaim against the plaintiff for an award of attorneys' fees pursuant to paragraph 10.11 of the PSA.
The defendant moved for summary judgment dismissing the complaint and on his counterclaim. In an order entered October 13, 2016, the Supreme Court denied the defendant's motion and, sua sponte, determined that the provision in paragraph 10.11 of the PSA allowing for two times the amount of attorneys' fees expended was an unenforceable penalty.
Following a nonjury trial, the Supreme Court issued a decision entered August 22, 2017, finding that the defendant's work as an employee of Springleaf involved corporate restructuring in violation of the covenant not to compete and that the plaintiff was entitled to recover damages in the principal sum of $825,000 for lost profits. The court did not make a finding as to whether the defendant violated the non-solicitation covenant and, in effect, directed dismissal of that cause of action. The court calculated the amount of damages predicated upon Capmark's payment to the Corporation of a gross fee of $275,000 per month for the work that it had performed for Capmark. The court reduced the gross fee by one half, to $137,500 per month, by deducting labor costs and expenses. The court determined that the defendant had spent six months as an employee of Springleaf on Springleaf's restructuring, and multiplied the net monthly figure that it had decided that the plaintiff had lost as profits by six for a total of $825,000. In a separate decision entered November 14, 2017, the court determined that the plaintiff was entitled to an award of attorneys' fees in the principal sum of $755,160 based upon a total of 1,774.3 hours billed at a rate of $435 per hour, without applying the double attorneys' fee provision of the PSA. A judgment was entered upon the two decisions, and subsequently an amended judgment was entered, which is in favor of the plaintiff and against the defendant awarding damages in the principal sum of $825,000, and awarding the plaintiff attorneys' fees in the principal sum of $755,160. The defendant appeals from the amended judgment, arguing that his motion for summary judgment should have been granted, that the evidence did not demonstrate that he violated the restrictive covenants, that the evidence was legally insufficient to sustain an award for lost profits, and that, as a result, the plaintiff was not entitled to an award of attorneys' fees since he was not the prevailing party. The plaintiff cross-appeals from so much of the amended judgment as awarded him damages in the principal sum of only $825,000 rather than the principal sum of $1,929,000, representing the value of the covenant not to compete as valued by his expert, or, in the alternative, in the amount of $2,887,500 for a 21–month, rather than a 6–month, period, based on the court's calculation of lost profits. The plaintiff also cross-appeals from so much of the amended judgment as did not double the award of attorneys' fees in compliance with the terms of the PSA.
"Under New York common law, a seller has an ‘implied covenant’ or ‘duty to refrain from soliciting former...
To continue reading
Request your trial
-
AB Oil Servs., Ltd. v. TCE Ins. Servs., Inc.
...of contract [causes of] action" ( Kronos, Inc. v. AVX Corp., 81 N.Y.2d at 95, 595 N.Y.S.2d 931, 612 N.E.2d 289 ; see Loughlin v. Meghji, 186 A.D.3d 1633, 132 N.Y.S.3d 65 ). Put differently, "a party's rights in contract arise from the parties' promises and exist independent of any breach. N......
-
Levi v. Levi
...949, 950, 82 N.Y.S.3d 474 ). Here, the record establishes that the defendant made significant non-economic contributions to the marriage 132 N.Y.S.3d 65 by acting as the primary caregiver to the two children, both of whom had significant special needs, enabling the plaintiff to work outside......
-
London v. 107(160) Realty, LLC
...Indem. Co. of Ill. v. Nnamani, 286 A.D.2d 769, 770, 730 N.Y.S.2d 522 ).Accordingly, we disagree with the determination granting 186 A.D.3d 1633 that branch of the defendants' motion which was pursuant to CPLR 5015(a)(4) to vacate the New York County default order. DILLON, J.P., LASALLE, CON......