The opinion of the court was delivered by: SWEET
This diversity action was commenced by Murray Newman ("Newman") against his former attorney Murray Silver ("Silver"), a resident of Georgia, and Ralph LiButti who was known to the parties at the time of the transactions in question as Robert Presti ("Presti"),
alleged without denial to be a New Jersey resident.
The complaint alleges causes of action for a breach of fiduciary duty, malpractice, fraud, and conversion. Upon the findings and conclusions set forth below, judgment will be entered on the first cause of action, and damages will be awarded in the amount of $169,300.00. The remaining causes of action will be dismissed.
The parties to this dispute would be readily recognized by O. Henry and Damon Runyon,
and it is regrettable that their skills and knowledge of the foibles of human conduct could not be combined to resolve the issues in this non-jury trial. The testimony, in its totality has presented a disturbing view of scenes behind the defense of a substantial criminal prosecution. As is so often the case, the convicted defendant, Newman, here seeks to blame his counsel, Silver, for his conviction and sentence and to recover amounts which he paid for legal services which he considers constituted malpractice, a breach of his attorney's fiduciary duty and worse.
In the fall of 1977 by virtue of a subpoena duces tecum served upon Capitol Motors, Inc. ("Capitol Motors") Newman, the company's president and chief executive officer and thirty percent shareholder, learned that the company, he and the company's other principal officer, Charles Romagnano ("Romagnano") were the targets of a grand jury investigation into the turning back of odometers ("clocking") by a number of used car dealers, some of which, like Capitol Motors, were located on Jerome Avenue in the Bronx. After consulting with his regular counsel, who advised that he had little familiarity with criminal proceedings, Newman retained Paul Perito, a former Assistant United States Attorney in this district, who had been suggested to him by his son, Gary Newman ("Gary").
At this early stage the indistinct outline of the role played by Presti emerges. Presti, by his own testimony, is a horseman, an owner, buyer and seller of horses, as opposed to a player. In that connection he met Gary, who was interested in horses, and a friendship developed. There is also evidence from Gary that Presti had sold substantial numbers of new, or virtually new, cars. For whatever reason, both Gary and Presti testified to the existence of a close relationship, characterized as approximating that of father and son. Gary attended family as well as horse gatherings with Presti. From time to time, prior to the times in question here, Presti had need of legal counsel and in particular had engaged Perito to represent him in connection with a tax case. Presti had recommended Perito to Gary Newman when the latter sought to obtain the necessary licensing to participate in the racing business in New York State. It was as a consequence of this representation that Gary Newman recommended Perito to his father when the investigation into clocking became known.
Perito collected documents, conferred with his client and made submissions to the government in an effort to prevent the filing of an indictment against Capitol Motors and Newman, but these efforts were unavailing. On April 17, 1978 a sixty-six count indictment was returned naming Capitol Motors, Newman and Romagnano as defendants. The indictment charged violations of the odometer statute, wire fraud and mail fraud. The case was assigned to the Honorable Constance Baker Motley of this court, who suggested at an early pretrial conference that in view of the possibility of conflicting interests, the individual defendants should consider separate counsel. Accordingly, Newman consulted Perito, who recommended Richard Givens, another former Assistant United States Attorney, who was known to have experience in the trial of wire and mail fraud charges. Givens was retained and undertook to represent Romagnano in cooperation with Perito. The two lawyers set about the preparation of the defense. Perito's fee agreement called for the payment of time charges, while Givens was to receive a fee of $100,000 for representation through trial. Pretrial motions were prepared, argued, and determined, and the case set down for trial on August 23, 1978.
Late in July, preparation for trial was proceeding apace, and documents were being collected relating to the chain of title of the cars at issue. The application of the odometer statute with respect to cars destined for overseas shipment was the subject of research and discussion, since then, as now, Newman conceded the clocking with respect to such cars. According to Givens, the possibility of a viable defense turned upon the ultimate reach to be given the statute by the court and the ability of the government to establish the chain of title which was considered to be an essential element of its case. It was assumed that the government had obtained some evidence from one or more of the participants in the activities which were under indictment.
Both Givens and Newman describe in substantially similar terms a meeting which may well have been the critical one to set the events in motion which gave rise to this action. Newman with dogged determination pressed Perito for a personal evaluation of the case seeking an answer to the question "what would you do if you were in my situation." Perito refused to answer the question on the grounds of its impropriety and then finally acceded to the request by telling Newman that if he were Newman, he would seek to arrange a plea of guilty.
It was obvious to all those present, as it was obvious at this trial, that this was not the answer that Newman anticipated or wanted to hear. This shock is the best evidence of the reality which was being unpleasantly thrust upon him at his request. As a consequence of compelling Perito to answer his inquiry, Newman sought new counsel.
Gary asked Presti if he could arrange a consultation with Silver,
to whom Gary had been introduced by Presti during a trip to the Kentucky horse sales earlier in the spring.
Whether this introduction marked the first involvement in Newman's affairs by Silver or not was the subject of conflicting testimony. Gary testified that Presti, in an effort to be helpful, had previously asked Silver if he could find out anything about Newman's case, that Silver had done so and had reported that Perito had made unnecessary concessions to the government and had unduly complicated the case. Silver and Presti deny that this advice had been given, but it is conceded that at some time before Silver was retained, Newman had been told that Silver had represented the former governor of Georgia, Jimmy Carter, then President, and that he knew the then Attorney General of the United States, the Honorable Griffin Bell. Based on the testimony of Silver, these representations, standing alone, were accurate. In addition, Presti testified that in the course of seeking to sell Silver a horse, he had visited Silver's Atlanta office in which was displayed a picture of Silver and the Carters. There is no evidence adduced by Newman to establish that Silver's information concerning Perito's conduct of the case, allegedly conveyed to Gary, was knowingly false. On the other hand, it is unquestioned that Silver's relationship to the President and the Attorney General was known to Newman at the time that he requested the initial interview with Silver.
Whether the arrangements for the first meeting on July 28 were arranged by Presti, as testified to by Gary, or by Gary assisted by Presti, is not important, for Presti testified that he talked with Silver before the latter came to New York and told him that if Newman failed to pay the agreed upon fee for the initial consultation, $10,000, he, Presti, would pay the fee. A limousine was laid on at Presti's suggestion, and the morning after the initial telephone call Silver was met at LaGuardia Airport by Mr. and Mrs. Newman, Gary and Presti. They drove to the "21" Club, again at Presti's suggestion, and the case against Newman was discussed. The discussions at "21" went on for two or three hours after which the limousine took everyone present to the offices of Capitol Motors where Silver was given a check for $10,000, and then left town.
Both Gary and Murray Newman testified that in the car going to "21" on July 28 and while at the restaurant, there was discussion concerning the nature of the charges and the facts of the case and that after lunch while the discussion continued in the lounge area, Newman asked how much it would cost to have Silver represent the defendants, that Silver then left to confer with Presti outside of the hearing of the Newmans, that Presti returned alone and advised the Newmans that Silver would undertake the representation for a fee of $250,000 in cash to be made in two payments. Thereafter, according to the Newmans, they rejoined Silver who had been waiting in the limousine, and in the car on the trip to Jerome Avenue, accepted the terms of the fee arrangement. Presti, on the other hand, testified that he heard a discussion of fee arrangements which depended largely on the work to be performed and recalled that "there were some big numbers and there were some little numbers." Based upon all the evidence, and particularly the events that followed, I find that it was agreed that Silver would receive a substantial amount in cash in connection with his representation of the Newmans and Romagnano and Capitol Motors, although the details of how much, for what period of time or for what services were not specified.
July 28, the date of the "21" meeting, was a Friday, and Newman immediately set about raising cash. On Monday July 31 Milton Jacobs went to his bank, withdrew $25,000 and loaned it to Newman. Mrs. Newman also raised $25,000 as reflected in her bank records. According to Newman, he received $41,000 from his father and in addition took $7,000 which was in his house, making a total of $98,000 which was counted at the office of Capitol Motors on the afternoon of July 31. Since the amount was short of the anticipated $100,000, Newman testified that those present, including Romagnano, contributed whatever was available and thus raised another $2,000. After the money was collected, Gary placed it in his briefcase, picked up Presti, and they drove to Newark Airport. Presti left on the plane for Atlanta, called after arrival to say that the briefcase had been delivered and then returned to Newark where Gary picked him up and drove him home. Silver denied receiving any cash.
Silver returned to New York the following day, and the same participants had dinner at Laurent. According to Newman, he advised Silver that he could not raise the entire $250,000 in cash but that he would pay $50,000 by check, to which Silver replied that such a payment would increase his tax liability and therefore a check in the amount of $60,000 to offset the increased tax liability would be required. It is undisputed that a check in that amount was delivered by Newman to Silver that evening and deposited by the latter in his escrow account. Thereafter Silver transferred $30,000 to his personal account and wrote another $30,000 check to someone whose identity he no longer recalls.
During the week of July 31 at a luncheon meeting at Bill Han's restaurant which followed a meeting between Silver and the prosecutor, Newman claims to have been advised by Silver that the prosecutor's file contained the following notations: 10 years -- $450,000 fine -- extensive publicity. Conferences concerning the case were held in Silver's suite in New York at the Sherry Netherland.
Over the weekend of August 6 Newman sought to raise additional funds and on Monday obtained $30,000 from Jeanette Gitter, an old friend who cashed a certificate of deposit for the purpose, the certificate having come due on August 7. Newman gave Mrs. Gitter three $10,000 notes, some of which have been paid. According to Newman he also received $4,000 from his father, $5,000 from his son Peter, $10,000 from Gary, as well as $22,000 from his own account at the Roslyn Savings Bank. According to Newman another $29,000 was obtained in cash from Capitol Motors. Documentary evidence was submitted to substantiate the loans from Mrs. Gitter, the sons and the withdrawal from the Roslyn Savings Bank, for a total of $67,000. Gary gathered the money, took it in a briefcase to Presti who on August 8, 1979, again travelled to Atlanta to deliver the briefcase which was returned to the Newmans during the following week.
Presti testified that he sought to assist the Newmans in any way he could and made the two trips to Atlanta with a briefcase given to him by Gary, which he delivered to Silver. He testified that he did not recall the dates of the trips and did not know the contents of the briefcase. He differed with Gary concerning the size of the briefcase, believing it to be larger.
Silver came to New York on August 9, 1979 and again during the week a round of conferences were held. In addition, at some time during this two week period, Silver took additional action which was carefully noted by the trial judge on the record and characterized as improper. Silver caused a call to be placed to the judge on Newman's behalf by Martin Luther King, Sr. The call was refused, a refusal which gave rise to a letter written by King on Newman's behalf. Silver also sought an ex parte meeting with the judge to explain his relationship with Andrew Young to dispel any suspicion that he should be stereotyped because he was white and came from Atlanta, Georgia. When his request was rejected Silver informed the judge's clerk of his purpose. While these acts were explained by Silver as unfamiliarity with the practices in this district, they are some evidence of the "powerful" aspect of Silver's representation on which Newman relied.
On August 15 a long meeting was held at Silver's suite, the entire case was reviewed, Presti was present, and considerable discussion revolved around the significance of the notation that Silver had reported to have been placed on the prosecutor's file. Newman wept as he reviewed his alternatives and after conferring separately with Gary, decided to plead guilty. No contemporaneous documents were submitted by either Silver or Newman concerning this meeting or the decision to plead guilty.
On August 17 the plea was taken, and Newman testified before the judge with respect to his request to change his plea and the facts upon which the plea was based. A judgment of conviction was entered on the record, and sentencing was set for September 29, 1978. According to Newman, after the plea of guilty had been accepted, in a conversation in the hall it was suggested to him that it would be necessary to "have a seal," which Newman understood to be a means of insuring that a jail sentence would not have to be served. Newman testified that he was told that another $100,000 would be required for that purpose and consequently gave Silver four checks of $25,000 each, stating that the checks could not be cashed immediately because of a lack of funds and that he should be advised before any attempt to negotiate the checks.
On August 19, 1978, Newman concluded that he did not wish to make the requested payment and asked for the return of the checks. He met Presti over the weekend and was handed an envelope which contained three of the checks, one already having been cashed. Presti confirmed the meeting and the envelope, but not its contents. The checks were introduced into evidence over the objection of Silver who maintained that he had no knowledge concerning any check other than one check for $25,000 which had been cashed. As to that check, Silver deposited $12,500 in his personal account and wrote another check for $12,500, to a person whose identity he did not recall.