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February 28, 1984


The opinion of the court was delivered by: CANNELLA


After a nonjury trial on the merits, the Court finds for plaintiff in part.

Defendants' motion for a directed verdict is denied. Fed. R. Civ. P. 50(a).


 Plaintiff, Arrow, Edelstein & Gross, P.C., a New York law firm, seeks attorneys' fees for services allegedly rendered to musicians Gary Rossington ["Rossington"] and Allen Collins ["Collins"]. Rossington and Collins contend that although plaintiff rendered the alleged services, they are not individually liable because the services were not rendered to them individually but, rather, were rendered to the three Florida corporate defendants -- Navel Engagements, Inc. ["Navel"], Rosco Productions, Inc. ["Rosco"], and Moonpie Music Company ["Moonpie"]. On April 9, 1982, at which time this action was before Judge Duffy, the Court held that no written contract existed between the parties for the recovery of attorneys' fees. See Memorandum and Order, 81 Civ. 5471 (KTD) (S.D.N.Y. Apr. 9, 1982) ["April Order"]. When defendants moved to dismiss the second amended complaint, Judge Duffy granted the motion insofar as it was consistent with the April Order and suggested that plaintiff proceed on a theory of quantum meruit. Memo Endorsed, 81 Civ. 5471 (KTD) (S.D.N.Y. Sept. 8, 1982). A nonjury trial was held on July 13 and 14, 1983 before Judge Cannella.

 The Court's findings of fact are: Collins and Rossington became acquainted with Allen Arrow, a partner of plaintiff, while they were members of the musical group Lynyrd Skynyrd, for whom plaintiff performed legal services. Lynyrd Skynyrd was disbanded as the result of an unfortunate plane crash in 1977 in which two members of Lynyrd Skynyrd were killed. *fn1" Thereafter, Rossington and Collins discussed plans of forming their own band -- the Rossington Collins Band ["the Band"] with Arrow. *fn2" A business relationship developed between Arrow and Rossington and Collins wherein plaintiff, with the assistance of Joseph Rascoff, an accountant and financial manager, organized the Band and formed three corporations to manage the Band's business affairs. The three corporations which were incorporated on October 17, 1979 were: Rosco, which was the recording company for the Band; Navel, which handled touring matters for the Band and became a subsidiary of Rosco; and, finally, Moonpie, which engaged in the business of song publication. *fn3"

 Plaintiff alleges it performed legal services which included: formation of the Band and incorporation of Navel, Rosco and Moonpie; the negotiation of a record contract with MCA Records for the Band; organization and execution of the Band's 1980 Tour; criminal matters; personal advice; and the "Mills" and "Contraband" matters. *fn4"

 A portion of the legal services performed by plaintiff were completed before the formation of the corporate defendants. Plaintiff considered Collins and Rossington as its clients rather than the Band or the corporate defendants. Arrow and Collins and Rossington discussed fee arrangements, as evidenced by a series of letters, but the 5% retainer contract proposed by plaintiff was never signed by Collins or Rossington. *fn5" In fact, these fee arrangements were first discussed in the fall of 1979, shortly before the formation of the corporate defendants. Thereafter the following procedure was employed for the billing of plaintiff's clients: Rascoff would direct plaintiff to send its bills to one of the three corporations. *fn6" The record indicates that the corporate defendants were the entities that paid plaintiff. *fn7"

 On September 15, 1980, the relationship between defendants and plaintiff was terminated. *fn8" On March 1, 1981, plaintiff made a demand for payment from Rossington, Collins, Rosco and Navel in the amount of $66,558.01. At trial, however, and in its post-trial brief, plaintiff sought $123,500 for attorneys' fees. Although the March demand and the post-trial brief seek attorneys' fees for the same services, the discrepancy in damages has not been adequately explained to the Court. *fn9" Rossington subsequently left the group and Collins formed the Allen Collins Band which is not involved in this action.

 While Arrow and Rascoff contend that they considered Rossington and Collins their clients, their actions and the evidence presented do not support such a finding. One of plaintiff's associates who performed work for Rosco and Navel testified that the corporate defendants were formed to shield Rossington and Collins from liability. *fn10" Furthermore, Rossington and Collins were never informed that they would be personally liable for attorneys' fees. *fn11" While Rossington and Collins controlled the corporate defendants, all the Band members received royalties from the corporations. *fn12" Finally, the work performed by plaintiff was rendered for the Band and the corporate defendants. The business records, including correspondence and invoices, refer to the corporate defendants rather than to Rossington and Collins. *fn13" The MCA contract, for example, was negotiated on behalf of the Band. Likewise, the Band's 19080 tour was organized for the Band in association with Navel. The corporate defendants clearly benefited from plaintiff's professional services.

 Rascoff testified that he never billed Rossington and Collins individually, but rather, billed the corporations as a matter of convenience. Having observed Rascoff's demeanor and acknowledging his expertise in the areas of accounting and evaluating the reasonable value of attorneys' fees, the Court does not credit his testimony. Likewise, the Court does not credit Arrow's testimony when he testified that the corporate defendants were billed merely as a convenience for Rossington and Collins. Having formed the corporate defendants, clearly, Arrow was on notice of Rossington and Collins' limited liability. *fn14" Thus, once the corporations were formed, they incurred the legal expenses associated with the Band that are the bulk of this litigation.


 In a diversity action, a federal court must apply the substantive law of the state in which it sits, Erie Railroad Co. v. Tompkins, 304 U.S. 64, 82 L. Ed. 1188, 58 S. Ct. 817 (1938), including the choice of law rules of the forum state, Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941). Thus, New York choice of law rules govern the instant action and require the Court to examine the interests of each state involved in the litigation, Babcock v. Jackson, 12 N.Y.2d 473, 191 N.E.2d 279, 240 N.Y.S.2d 743 (1963), and apply the law of the state with "the most substantial interest in the issue" to be resolved. Wheeler v. Standard Tool & Manufcturing Co., 359 F. Supp. 298, 301 (S.D.N.Y. 1973), aff'd, 497 F.2d 897 (2d Cir. 1974). The two interested states in this litigation are New York and Florida. While substantial contacts occurred in both states, Judge Duffy applied New York law to prior issues that arose in this action. Noting that there has been no suggestion that the law of any state other than New York applies to the issue of the value of attorneys' fees, the Court recognizes that New York has a strong interest in this action, especially since much of the legal work was performed in New York. Accordingly, the Court applies New York law to this issue.

 Expert Witness

 The Court reserved decision concerning the qualifications of Rascoff as an expert on the fair and reasonable value of attorneys' fees. Rascoff is an accountant and a business manager in the entertainment industry. His former clients include the Rolling Stones, The Who, J. Geils Band and the Allman Brothers Band. Because of his experience in the entertainment field and his knowledge of attorneys' fees, the Court determines that his testimony was helpful and that he qualifies as an expert in this area. See Fed. R. Evid. 702.

 With respect to the value of the legal services, the Court observes and defendants concede that plaintiff has extensive experience in entertainment law. Arrow and Roscoff testified as to the reasonable value of attorneys' fees and defendant offered no evidence to the contrary. Nonetheless, for the Court to properly evaluate plaintiff's demand, plaintiff will be permitted to amplify the records already submitted to include the approximate hours spent per matter, hourly rate of the attorneys involved in the action, *fn15" see Matter of Cap'n Rick Corp., 525 F. Supp. 31, 35 (S.D.N.Y. 1981); City of New York v. Darling-Delaware, 440 F. Supp. 1132, 1134 (S.D.N.Y. 1977), and the specific allocation of liability between Collins and Rossington concerning legal matters discussed, infra. *fn16"

 Quantum Meruit

 Initially, the Court notes that "[t]he granting of equitable relief lies within the sound discretion of the trial court, so long as that discretion is exercised in accordance with the applicable established precedents." Indyk v. Habib Bank Ltd., 694 F.2d 54, 57 (2d Cir. 1982). When alleging a claim for attorneys' fees on a theory of quantum meruit, plaintiff must establish "proof of the services performed, and the value thereof." People v. Chambers, 286 A.D. 1042, 1042, 145 N.Y.S.2d 329, 330 (2d Dep't 1955). At trial, defendants did not dispute that plaintiff performed legal services; *fn17" rather, the issue is whether Collins and Rossington individually or the corporate defendants are liable for plaintiff's professional services.

 In addition, because plaintiff is proceeding in quantum meruit for its professional services, it is entitled to recover interest from the date of the demand of payment which is March 1, 1981. See Spanos v. Skouras Theatres Corp., 235 F. Supp. 1, 17 (S.D.N.Y. 1964) (applying New York law), aff'd in part and rev'd in part, 364 F.2d 161 (2d Cir. 1964), cert. denied, 385 U.S. 987, 87 S. Ct. 597, 17 L. Ed. 2d 448 (1966); Govern & McDowell v. McDowell & Walker, Inc., 75 A.D.2d 979, 980, 428 N.Y.S.2d 367, 368 (3d Dep't. 1980); Brent v. Keesler, 32 A.D.2d 804, 805, 302 N.Y.S.2d 349, 351-52 (2d Dep't 1969); N.Y. Civ. Prac. Law § 5001 (McKinney 1963).

 The relationship between plaintiff and Collins and Rossington began sometime in 1978. Plaintiff negotiated, prepared and executed contracts and settlements on behalf of Collins, Rossington, the Band and the corporate defendants. The Court is persuaded that the bulk of plaintiff's services were performed on behalf of the corporate defendants for the following reasons: First, while there was a relationship between plaintiff and Collins and Rossington before the incorporation of Navel, Rosco and Moonpie and work was performed prior to that date, Rossington and Collins were never billed individually. Furthermore, plaintiff certainly cannot maintain that it had no notice of the formation of the corporate defendants. Comprised of attorneys, plaintiff is presumed to know that one of the hallmarks of corporations is limited liability of the officers, directors and shareholders. See Mortimer B. Burnside & Co. v. Havener Securities Corp, 25 A.D.2d 373, 269 N.Y.S.2d 724 (1st Dep't 1966) (per curiam).

 Second, Rossington and Collins cannot be held individually liable for corporate obligations unless there is "some direct and explicit evidence of intent." Salzman Sign Co. v. Beck, 10 N.Y.2d 63, 66, 217 N.Y.S.2d 55, 57, 176 N.E.2d 74 (1961). Although plaintiff argues that Rossington and Collins are liable for its professional services, its actions belie this assertion. *fn18" The Court notes that one of plaintiff's asso ciates, Paul Truss, testified that if a contract were breached, he would sue one of the corporate defendants rather than Rossington or Collins. *fn19" Furthermore, while the corporate defendants may have been organized for tax purposes, plaintiff has not attempted to pierce the corporate veil or to argue that corporate formalities were not observed. *fn20" Once the Band was organized and the corporate defendants were formed, the legal services performed on their behalf are to be incurred by them. *fn21"

 Legal Services Provided for Rossington and Collins Individually

 The legal services rendered by plaintiff with respect to defendants' Rossington and Collins' wills, estates and matrimonial matters clearly constitute personally matters for which Rossington and Collins are personally liable. While plaintiff alleges that $3,000 worth of legal work was perfomred in this regard, plaintiff has not indicated how much is allocated to each individual. Accordingly, the Court requests a breakdwon.

 Plaintiff represented Collins in various criminal matters which were unrelated to the corporate defendants. Accordingly, personal liability falls on the individual who benefited directly from plaintiff's professional services. *fn22" To determine whether the fees for the criminal matters are to be assessed solely against Collins, the Court requests a breakdown concerning these criminal matters.

 In addition, plaintiff negotiated an agreement with a musical group called Contraband, whereby it was agreed that Rossington and Collins would not be associated with Contraband. The negotiations concerning Contraband occurred prior to the formation of the Band and the corporate defendants and benefited Collins and Rossington individually. More important, as defendants correctly observe, they concerned personal obligations of Rossington and Collins. While other members of the Band were also benefited by these negotiations, the correspondence that concerns this matter -- unlike the correspondence regarding other matters in this action -- refers individually to Rossington and Collins. *fn23" Accordingly, they are equally liable for the legal services rendered in connection therewith. The Court requests an affidavit setting forth the number of hours that were spent by plaintiff on this matter.

 Legal Services Rendered to Corporate Defendants

 With respect to the claim for the incorporation expenses of the Florida corporate defendants, the Court notes that it is not required to apply the laws of one state to all the issues raised in a lawsuit. See Pan American World Airways, Inc. v. Boeing, 500 F. Supp. 656, 659 (S.D.N.Y. 1980); Oakley v. National Western Life Insurance Co., 294 F. Supp. 504, 506 (S.D.N.Y. 1968). Although there is no conflict in the laws of New York and Florida on the liability of the corporation for its formation, the Court applies Florida law to this issue. The Florida General Corporation Act provides that a corporation may pay the expenses of its formation or reorganization. Fla. Stat. Ann. § 607.064 (West 1977); see N.Y. Bus. Corp. Law § 507 (McKinney 1963). While the members of the Band may have benefited by the creation of the corporate defendants, it is the corporate defendants who are liable for the incorporation expenses.

 Furthermore, the corporate defendants are liable for the legal services rendered in association with the record contract for the Band; the Band's 1980 Tour; with subpublicity; the Rodney Mills matter and any subsequent services that are specifically alleged in its post-trial brief. If the subsequent judgment to be submitted by plaintiff is to include the amount recoverable from the corporate defendants as well as Rossington and Collins, then the Court requests a breakdown of hours spent on these matters.


 In accordance with the foregoing, plaintiff is directed to serve and file within fourteen (14) days of the date of this Opinion supplemental records and the allocation of the attorneys' fees between Collins and Rossington.

 Submit Judgment forthwith.


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