which he characterizes as only a limited inquest, would not have been the attorney he would have chosen for a trial. It does not take an attorney "experienced in business litigation," Pl.'s Reply to Supp. Letter Br., Point V, as opposed to "a sole practitioner," to raise the simple defense that a partnership relationship no longer existed at the time in question. Justice Held asked Levitin if he had any defenses. Tr. at 382, 840. Levitin does not claim -- and could not credibly -- that he wanted to raise the defense but his attorney refused. Thus, counsel was both available and adequate. In addition, there is no showing or claim of any prejudice and no new evidence, which could not be brought earlier, has appeared.
While the plaintiff contends that Homburger lied on the stand when he denied receiving cash from plaintiff and that this was not addressed during the inquest because it was irrelevant to the issue of damages, Pl.'s Response to Supp. Letter Br. at Point II, the court during the inquest, as noted above, did not take a limited view of what was relevant on the issue of damages and made assessments of the credibility of both Homburger and Levitin. See Tr. at 66-68; 199-217; 430-438; 458-468; 480-498; 584-594; 629-635. Although uncertainties remain about the "real" relationship between Homburger and Levitin and OPMB, these matters were addressed during the inquest. The court rejected plaintiff's testimony in its totality and, in its award, accepted Homburger's testimony as to his interest in the partnership. The issue of whether there had been a buy-out was thus, rightfully, fully and fairly litigated. Consequently, plaintiff is precluded from relitigating this issue in this action.
The defendants have met the burden of establishing that the identical issue, the alleged buy-out of Homburger's interest by Levitin, was necessarily decided. According to Professor David Siegel: "Where a judgment of a particular kind can be accounted for legally only by the existence of a certain combination of findings, each of those findings will be deemed established by the judgment." Siegel, New York Practice § 464 (West 1991). It must be recognized that default judgments also necessarily decide issues. Homburger specifically requested an accounting because, as he alleged, he was a partner in OPMB and did not receive any benefits from the Goodman settlement. Indeed, it was only if he was a partner that Homburger was entitled to an accounting.
But argues the plaintiff, this finding was established only because of defendants' malpractice and, therefore, the finding must be disregarded. While analytically this is technically correct, it ignores two important points.
First, in determining what damages to award Homburger, Justice Held sought to determine what percentage, if any, Homburger had in the partnership and it appears that he viewed this issue as a necessary predicate to determining Homburger's damages. Indeed, Justice Held heard hours of testimony from both Levitin and Homburger on their payments and agreements to each other. In his decision awarding Homburger damages, Justice Held accepted Homburger's claim that he owned and was entitled to twenty-one percent of the partnership equity.
Second, even if somehow it is deemed that the issue was not necessarily decided by Justice Held's damage determination and plaintiff is, therefore, not bound by this finding, see Seigel, New York Practice, supra at § 465 ("even an issue actually litigated may be denied the estoppel if it was not necessary to the judgment), it would under the circumstances be a waste of judicial resources and a source of possible embarrassment to retry this question in this court. An accounting is an action in equity to be tried by the court without a jury, See 1 N.Y.Jur2d 181-83 (Lawyers Co-Op. Pub. 1979) ("The jurisdiction of courts of equity to state and settle accounts, or to compel an accounting, is exercised . . . where fraud is charged"), Fedoryszyn v. Weiss, 62 Misc. 2d 889, 892-93, 310 N.Y.S.2d 55 (Nassau Cty 1970) (discussing accounting as a specific remedy in a conversion suit); In re James' Estate, 173 Misc. 1042, 1044-45, 19 N.Y.S.2d 532 (N.Y. Cty 1940) (accountings are equity suits handled by the court in order to create a more effectual and speedier remedy). Justice Held found the plaintiff to be a completely unreliable witness:
I find that the testimony of Levitin was rampant with contrivance and connivance. I find that it was a devious and contorted testimony that was manufactured and tailored on the spot. . . . I find him to be totally unworthy of belief. (Tr. 1360-1.)
In light of this unequivocal finding of plaintiff's lack of credibility, it is evident that had there been no default, the state trial judge would have found no merit to the affirmative defense, and Levitin would have lost.
It would also be an enomous embarrassment to the judicial system for a jury in a federal court to conclude otherwise. See Schwartz, 298 N.Y.S.2d at 962 (one of collateral estoppel's purposes is to "reduce the number of inconsistent results which are always a blemish on a judicial system.") In any case, the jury would be entitled to know of Justice Held's opinion of the plaintiff's credibility since it would be relevant on the issue of proximate cause -- i.e. whether plaintiff here had a viable defense. Moreover, plaintiff has offered nothing to indicate that Justice Held's credibility finding was unwarranted. Other than the interested testimony of his wife, who was previously present during some of his conversations with Homburger, too, he still offers no credible evidence to support his claim of a buy-out. He would not have been successful even if there had been no default.
In sum, because of both the law and the unique facts of this case, the affirmative defense of an alleged buy-out was actually decided against Levitin in the earlier state court action and that determination was a necessary one for the court to make in deciding Homburger's damages. In any case, the record is clear that the state court would have found no merit in Levitin's claim of an alleged buy-out.
The preclusive effect of Justice Held's adverse finding on the question whether there had been a buy-out directly impacts on plaintiff's attorney malpractice claim. It is well settled that to prove attorney malpractice, plaintiff has the burden of proving that: an attorney-client relationship existed; the attorney was negligent; the attorneys' negligence was the proximate cause of the plaintiff's damages; and, directly because of the attorneys' actions, plaintiff suffered actual damages. Hanlin v. Mitchelson, 794 F.2d 834, 838 (2d Cir. 1986); Plentino Realty, Ltd. v. Gitomer, 628 N.Y.S.2d 75, 76 (1st Dep't. 1995); Marshall v. Nacht, 172 A.D.2d 727, 569 N.Y.S.2d 113 (2d Dep't. 1991); O'Brien v. Spuck, 99 A.D.2d 910, 472 N.Y.S.2d 514 (3d Dep't. 1984). The defendants, Rosenthals, in this summary judgment motion, have accepted for the sake of argument the first two elements as true and maintain that there is no factual issue in dispute regarding the third element of the test. The Court agrees. The third element of the attorney-malpractice test is a "but for" requirement -- but for the attorney's negligence, the plaintiff would not have suffered the damages alleged. Geraci v. Bauman, Greene & Kunkis, P.C., 171 A.D.2d 454, 567 N.Y.S.2d 36, 37 (1st Dep't. 1991) ("In an action for legal malpractice, a plaintiff is required to prove that 'but for' the negligence of his attorney, he could have recovered damages in the underlying action."). Because Levitin's affirmative defense was in fact decided against him after a full and fair opportunity to raise this defense -- that Homburger had no interest in the partnership -- he has no defense to his conversion of the partnership funds. Thus, even if the Rosenthals were guilty of attorney malpractice, Levitin still would be liable for an accounting. Levitin, therefore, suffered no damages as a result of the defendants' alleged malpractice. Accordingly, the requirements for a malpractice claim cannot be met, and the summary judgment motion should be granted.
Because the plaintiff's affirmative defense was fully and fairly litigated and the result was adverse to him, he cannot meet the "but for" element of the attorney malpractice requirements. Therefore, the defendants' motion for summary judgment is granted. The Clerk of the Court shall issue a judgment dismissing the complaint.
Dated: Brooklyn, New York
October 24, 1995
David G. Trager
United States District Judge