Molina v. Faust Goetz Schenker & Blee, LLP

• Decision Date: 31 January 2017
• Docket Number: 15–cv–9010 (LAK)
• Citation: 230 F.Supp.3d 279
• Parties: Benny MOLINA, Plaintiff, v. FAUST GOETZ SCHENKER & BLEE, LLP, and Kirl C. Francis, Defendants.
• Court: U.S. District Court — Southern District of New York

230 F.Supp.3d 279

Benny MOLINA, Plaintiff,

v.FAUST GOETZ SCHENKER & BLEE, LLP, and Kirl C. Francis, Defendants.

15–cv–9010 (LAK)

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

Signed January 31, 2017

Anthony T. DiPietro, Law Office of Anthony T. DiPietro, P.C. , Attorney for Plaintiff.

Michael V. DeSantis, Anthony J. Proscia, Adam M. Marshall, Kaufman Dolowich & Voluck , LLP, Attorneys for Defendants.

MEMORANDUM OPINION

Lewis A. Kaplan, District Judge.

Plaintiff Benny Molina brought this legal malpractice suit against the lawyers who represented him in two related state court actions that culminated in the entry of substantial default judgments against him. But, due to a series of agreements between Molina and the plaintiff-judgment-creditor in one of the underlying actions, Molina sues here as the assignee of the judgment-creditor. Defendants have moved for summary judgment dismissing the amended complaint on several grounds. They rely chiefly on the equitable doctrine of judicial estoppel. The Court agrees that the doctrine applies and holds that Molina, as the judgment-creditor's assignee, may not take positions here contrary to those his assignor successfully advanced in the state court actions. For that reason, the Court grants defendants' motion for summary judgment in its entirety without addressing their remaining arguments.

Facts

The following facts are undisputed.¹

Between 2002 and 2006, Molina, through various companies under his control, performed renovation and construction work on the Manhattan building in which Gregory and Julie Oyen owned a penthouse apartment. In 2005, the Oyens' apartment suffered extensive water damage. The Oyens and their insurer, Allstate Insurance Company ("Allstate"), filed related state court actions in which they alleged, among other things, that Molina's negligence in repair work on the building's roof had caused the damage.

Molina retained the law firm Faust Goetz Schenker & Blee, LLP ("Faust Goetz") to represent him and the corporate defendants named in underlying actions, with associate Kril Francis handling the day-to-day litigation of the case. In March 2011, Francis filed a motion for summary judgment dismissing the underlying actions, which the court granted as to one of the corporate defendants. The judgment on its face did not apply to Molina in his personal capacity, so he remained a party to the case. Despite this, Francis and Faust Goetz, through inadvertence (according to Faust Goetz) or deception (according to Molina), stopped appearing on behalf of Molina. After counsel for Molina failed to appear for seventeen pre-trial conferences from 2011 through late 2013, the underlying actions proceeded to inquest on April 29, 2014.

At the inquest, Gregory Oyen submitted an affidavit in which he repeated the allegations in the complaint pertaining to Molina's negligence. Oyen stated also that he had suffered damages totaling $1,724,447.49. Oyen's attorney, Daniel J. Hansen, affirmed the damages calculation in his submission to the court. The court awarded net damages of $1,024,447 plus interest to the Oyens and $262,592 plus interest to Allstate, which both parties later entered as judgments against Molina. Faust Goetz's attempts to have the judgments vacated proved unsuccessful.

Molina and the Oyens then entered into an agreement (the "First Assignment") in which Molina assigned to Gregory Oyen "all rights, benefits, causes of action, and claims" he might possess relating to the underlying action involving Oyen, including claims for legal malpractice.² The First Assignment gave Oyen the "exclusive legal power to prosecute" the claims "without the need for further agreement or action" by Molina.³ The agreement provided also that Hansen would serve as Oyen's lawyer "[f]or all purposes, including entering into [the First Assignment], as well as the pursuit of the [a]ssigned [c]laims," and that separate counsel would represent Molina and his companies.⁴

Shortly after the execution of the First Assignment, Hansen filed an action in this Court on behalf of Molina against Faust Goetz (the "First Malpractice Suit"), asserting claims nearly identical to those in this case. He did so despite the fact that Molina previously had assigned his right to prosecute the claim to Oyen. With that suit pending, Hansen emailed Allstate's counsel a draft of a new assignment agreement between Molina and Oyen and proposed that Oyen and Allstate share in the costs and proceeds associated with the pursuit of the malpractice claims. On November 16, 2015, the parties in the First Malpractice Suit stipulated to its dismissal without prejudice.

Next, Oyen and Molina executed a second agreement (the "Second Assignment") in which Oyen purported to "assign[ ] back to Molina" any interest covered by the First Assignment.⁵ Molina agreed to "commence and duly prosecute" the malpractice case against Faust Goetz and to transfer "[a]ny amounts received" in connection with the suit to "the attorney escrow account of the attorneys of Oyen."⁶ The Second Assignment provided also that the net proceeds would be distributed, "without any further agreement, notice, or other requirements, as follows: 6% to Molina and 94% to Oyen, with all amounts applied toward the satisfaction of the [j]udgements."⁷ Like the First Assignment, the Second Assignment provided that Hansen would serve as Oyen's attorney "[f]or all purposes, including the entering into this [a]greement, as well as the pursuit of the" assigned claims, and that Molina would be represented by separate counsel.⁸

Simultaneous to the Second Assignment, Molina retained Hansen and his firm to "commence and diligently prosecute in good faith" a second malpractice suit for a fee of "thirty-three and one-third (33 1/3) percent of the sum recovered, whether recovered by judgment, settlement or otherwise."⁹ Remarkably, the retainer agreement included a grant from Molina to Hansen of "a power of attorney" so that Hansen would have full authority to settle the case for any amount without further approval from Molina.¹⁰ An additional term provided that Hansen could endorse Molina's name "on any checks that may be paid in settlement" and "retain out of said monies ... the legal fee as computed pursuant to this agreement."¹¹

Hansen then filed this suit on behalf of Molina (the "Second Malpractice Suit") on November 17, 2015. The complaint made a common law negligence claim and asserted a violation of New York Judiciary Law Section 487. But even after he began litigating this case, ostensibly on behalf of Molina, Hansen continued to represent Oyen in negotiations with Allstate over the terms on which they would share the costs and proceeds of the malpractice lawsuit. Nor did Hansen's involvement in this case end when attorney Anthony T. DiPietro was substituted as Molina's counsel. Rather, Hansen prepared the draft reports for Molina's experts and appeared as Oyen's counsel at his non-party deposition.

Discussion

New York law governs this diversity action.¹² In line with many jurisdictions and the federal courts, New York follows the doctrine of judicial estoppel, whereby "a party who assumes a certain position in a prior legal proceeding and secures a favorable judgment therein is precluded from assuming a contrary position in another action simply because his or her interests have changed."¹³ The equitable doctrine "rests upon the principle that a litigant should not be permitted to lead a court to find a fact one way and then contend in another judicial proceeding that the same fact should be found otherwise."¹⁴ Doing so could be viewed as "playing fast and loose with the courts."¹⁵

Equitable in nature, the doctrine "cannot be reduced to a precise formula or test,"¹⁶ but its requirements are well catalogued. The New York Court of Appeals has cited approvingly¹⁷ to the United States Supreme Court's helpful articulation of the factors courts typically consider:

"First, a party's later position must be clearly inconsistent with its earlier position. Second, courts regularly inquire whether the party has succeeded in persuading a court to accept that party's earlier position.... A third consideration is whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped."¹⁸

These factors are not "inflexible prerequisites" and do not constitute "an exhaustive formula," as [a]dditional considerations may inform the doctrine's application in specific factual contexts."¹⁹ Ultimately, judicial estoppel is invoked at the court's discretion.²⁰

The somewhat convoluted series of assignments in this case present a twist on an otherwise routine application of the doctrine. Molina brought this suit in his own name, ostensibly to redress the financial harm he allegedly has suffered to due to the alleged negligence of his lawyers in the underlying actions. But defendants argue that Gregory Oyen is the "de facto plaintiff."²¹ That is so, they say, because Molina gave away his right to sue in the First Assignment and derives his role as plaintiff here solely from the Second Assignment. Defendants further maintain that Molina, acting on behalf of Oyen, should be precluded from taking positions in this case inconsistent with those Oyen took in the underlying actions, which they contend Molina must do to prevail on either cause of action in the amended complaint. Not surprisingly, Molina opposes the application of judicial estoppel at each point.

I. Undisputed Facts Establish that Molina Stands in Oyen's Shoes for Equitable Purposes.

New York courts apply judicial estoppel, like any equitable defense, in tune to the identity of the real party in interest.²² The threshold issue of who is the "true plaintiff" in this case for equitable purposes can be resolved by application of black letter state law to undisputed facts.

In New York, causes of action generally are freely assignable.²³ An assignee of a cause...