Melcher v. Greenberg Traurig LLP

• Decision Date: 19 January 2016
• Docket Number: 650188/07,15790
• Citation: 2016 N.Y. Slip Op. 00274,135 A.D.3d 547,24 N.Y.S.3d 249
• Parties: James L. MELCHER, Plaintiff–Respondent, v. GREENBERG TRAURIG LLP, et al., Defendants–Appellants.
• Court: New York Supreme Court — Appellate Division

135 A.D.3d 547

24 N.Y.S.3d 249

2016 N.Y. Slip Op. 00274

James L. MELCHER, Plaintiff–Respondent,

v.GREENBERG TRAURIG LLP, et al., Defendants–Appellants.

15790

650188/07

Supreme Court, Appellate Division, First Department, New York.

Jan. 19, 2016.

Simpson Thacher & Bartlett LLP, New York (Thomas C. Rice of counsel), for appellants.

Jeffrey A. Jannuzzo, New York, for respondent.

Order, Supreme Court, New York County (O. Peter Sherwood, J.), entered May 19, 2015, which, insofar as appealed from, denied defendants' cross motion for summary judgment dismissing the complaint alleging a violation of Judiciary Law § 487, unanimously affirmed, with costs.

This action involves a claim that defendants Greenberg Traurig, LLP (GT) and Leslie D. Corwin, a GT partner, engaged in deceit while representing their clients in an action entitled Melcher v. Apollo Medical Fund Management L.L.C. and Brandon Fradd (N.Y. County, index No. 604047/03)(the Apollo action). Issues involving the Apollo action have come before us numerous times in various iterations; on this appeal, plaintiff James L. Melcher seeks treble damages for attorney deceit under Judiciary Law § 487.

Background

The background to the Apollo action bears repeating here. In 1995, Brandon Fradd founded Apollo Medical Partners (Apollo), a hedge fund focusing on the biotechnology industry. Fradd also founded Apollo Medical Fund Management, L.L.C. (Apollo Management) to manage investor money on behalf of the hedge fund. After the hedge fund suffered extensive losses in late 1997, Fradd decided to bring in Melcher, an experienced investment manager, as a member and manager of Apollo Management.

Melcher and Fradd, along with one other member of Apollo Management, signed an operating agreement, dated January 8, 1998, setting forth a formula to divide profits among them.¹ Under the agreement, Melcher and Fradd were to share equally the net profits realized from new investment assets brought into the hedge fund after Melcher became a member of Apollo Management. Melcher maintains that he complained to Fradd in January 2001 about the amounts he was receiving under the operating agreement, and that he met with Fradd over the next two years in the hope that they could resolve the matter amicably. Fradd asserts that no such meetings took place, and that Melcher never complained about the division of net profits. When Fradd and Melcher were unable to come to an agreement, Melcher commenced the Apollo action in 2003, asserting, among other things, that Fradd and Apollo Management had breached the operating agreement by failing to pay the amounts due to Melcher under that agreement.

In December 2003, Fradd produced a document that he maintained was a May 1998 amendment to the parties' operating agreement (the disputed amendment).

According to the disputed amendment, Melcher and Fradd had changed the formula for dividing profits so that Melcher was entitled only to certain compensation for money that he brought into the fund, not on all money that came in after January 1998. Melcher, however, insisted that no amendment ever existed, asserting that Fradd had forged and backdated the document only after the dispute arose, and only after Fradd's corporate counsel had informed him that a defense based on an oral amendment to the operating agreement had no more than a 50–50 chance of surviving a summary judgment motion.

At a January 27, 2004 meeting with Fradd and his counsel, Corwin stated that he had confirmed the disputed amendment's authenticity with Jack Governale, Apollo's former corporate counsel, who had purportedly drafted it. Melcher's counsel asked Corwin to turn over the original disputed amendment so that Melcher could determine, through forensic testing of the ink, whether Fradd had actually signed the document in May 1998.

However, before Melcher could send the disputed amendment for forensic testing, the document was damaged in a fire. According to Fradd, the day after the January 27 meeting, he brought the disputed amendment with him into the kitchen while he was making tea, and he set it on a counter next to the stove. When he went to answer the doorbell, Fradd said, the amendment caught fire and the first page was destroyed despite his efforts to put the fire out with water. Fradd stated that the portion of the second page that bore his signature was singed in the fire, and he dried it in the microwave oven to avoid smudging the ink. On February 1, 2004, Fradd informed Corwin via email of the incident. Melcher, however, did not learn of the alleged burning until March 18, 2004.

In mid–2007, Melcher, asserting that Fradd had engaged in spoliation of evidence, sought discovery from GT under the crime-fraud exception to the attorney-client privilege. The trial court granted GT's motion to quash the discovery request. Melcher also moved to strike the defendants' pleadings because they were deceitful, and to disqualify GT and Corwin as the defendants' counsel on the same basis, and the court denied those motions. On appeal, this Court affirmed the trial court's orders. In so doing, this Court held that Melcher had not “conclusively demonstrated” deceit with respect to the disputed amendment, and that the matter presented an issue for the trier of fact (Melcher v. Apollo Med. Fund Mgt. L.L.C., 52 A.D.3d 244, 245, 859 N.Y.S.2d 160 1st Dept.2008 ).

The Apollo action then proceeded to a jury trial in May 2009. Before trial began, the defendants decided to proceed on a theory of oral amendment of the operating agreement and accordingly, informed the court that they would not rely either on the disputed amendment or on Fradd's sworn assertion that the document was genuine. The trial court (Donna M. Mills, J.), granted the defendants' motion to withdraw the disputed amendment as a proposed trial exhibit, provided that Melcher was precluded from offering any evidence purporting to show that the disputed amendment was a backdated forgery (except in rebuttal if the defendants raised the issue).

At trial, the jury rejected Fradd's claim that the operating agreement had been orally amended and also found that Fradd had breached the operating agreement. However, the jury also found that Melcher was equitably estopped from asserting that the defendants had breached the operating agreement because he had initially accepted without objection the amounts that the defendants had paid to him under the operating agreement. In February 2010, the IAS court (Melvin L. Schweitzer, J.), entered a judgment in accord with the jury verdict.

In January 2013, this Court reversed the judgment entered after the trial in the Apollo action, setting aside the estoppel verdict, reinstating the breach of contract claim, and granting judgment as to liability in Melcher's favor on his breach of contract claim (Melcher v. Apollo Med. Fund Mgt. L.L.C., 105 A.D.3d 15, 29, 959 N.Y.S.2d 133 1st Dept.2013 ).² we further directed that the matter be remiTTED FOR A HEARING ON Melcher's allegations that Fradd had “fabricated, backdated and intentionally burned” the disputed amendment (id. at 23, 25, 29, 959 N.Y.S.2d 133). We noted that, although striking defendants' pleadings would have been an inappropriate sanction at that stage of the proceedings, we were “troubled that the allegations of fraud and deceit remain[ed] unaddressed” (id. at 25, 959 N.Y.S.2d 133).

In January 2014, Melcher and Fradd negotiated a settlement agreement in the Apollo action. The agreement explicitly carved out from the general releases Melcher's pending claims against GT and its “shareholders [and] partners,” and specifically reserved Melcher's rights and remedies in the action underlying this appeal. The settlement agreement also provided that no amount paid under it was “in regard to any liability of [GT] or Leslie D. Corwin pursuant to Judiciary Law Section 487, whether asserted in the [action underlying this appeal] or otherwise.”

The Current Action

In July 2007, at about the same time that he moved to strike the pleadings in the Apollo action, Melcher commenced the action underlying this appeal, alleging that defendants had engaged in deceitful and collusive conduct during their representation of Fradd and Apollo Management in the Apollo action and asserting an action for treble damages under Judiciary Law § 487. Melcher asserted that Fradd deliberately burned the disputed amendment so that Melcher would not be able to determine through forensic testing when the document had been signed.³ Melcher further alleged that as a result of defendants' actions, he incurred damages from excess legal fees, to be trebled under section 487, and lost use of money for more than three years.

In support of his claim, Melcher pleaded that as of February 2004, Corwin had learned that Governale had neither any recollection nor any record of drafting the disputed amendment, and that nothing in Governale's law firm's files or time records suggested that Melcher and Fradd had amended their operating agreement. Indeed, Melcher noted, Governale sent Corwin an email in which he noted that the disputed amendment did not bear a footer even though documents emanating from his law firm generally bore footers. Nevertheless, Melcher alleged, Corwin continued to rely on the disputed amendment, allowing Fradd to submit sworn statements attesting to its legitimacy, and making untrue statements under oath regarding availability of corporate counsel for deposition.

Melcher later filed an amended complaint in this action, and defendants moved to dismiss under CPLR 3711(a) on the ground that the Judiciary Law § 487 claim was barred by the three-year statute of limitations. The statute of limitations issue was litigated up to the Court of Appeals, which held that the section 487 claim was governed by the six-year statute of limitations in CPLR 213(1), and that this action was therefore timely commenced (Melcher v. Greenberg Traurig, LLP, 2011 N.Y. Slip Op. 34074[U], 2011 WL 11717557 [...