specific minutes of Trustee Meetings that are alleged to support the Cunningham Defendants' continuous representation of the Funds in connection with the purchase of the Brooklyn Properties.
Under New York law, the Funds have failed to demonstrate evidence of continuous representation sufficient to defeat the Cunningham Defendants' motion for summary judgment. In Albany Savings Bank, 463 N.Y.S.2d at 897, the Third Department held that an attorney's earlier representation in connection with a title examination was not sufficiently intertwined with the attorney's representation in a related mortgage foreclosure action to warrant tolling of the statute of limitations under this doctrine.
Likewise, here, Cunningham's representation of the Funds in connection with the 1994 sale of the Indian Creek property and the earlier renovations of that property are insufficient to warrant tolling of the statute of limitations here with respect to the malpractice claim arising out of the purchase of that property in 1987. Moreover, the Funds' broad allegation that all the real estate transactions were part of an ongoing scheme to defraud the Trustees is itself insufficient to warrant application of the continuous representation doctrine, in the absence of more specific allegations that the matters which gave rise to the claim were ongoing matters in which the Funds were represented by the Cunningham Defendants.
Accordingly, the Funds' legal malpractice claims against the Cunningham Defendants arising from the purchase of the Indian Creek and Brooklyn Properties will be dismissed.
The Levin Defendants contend that the Funds have not properly alleged causation in connection with their legal malpractice claims. The Funds' malpractice claims which are not time-barred are those arising from the purchases of the Brooklyn Properties and the 18th Street Property. With respect to these properties, the Funds allege that a contractual relationship existed between the Funds and the Levin Defendants, pursuant to which L&W and Levin had a duty to represent the Funds with the reasonable care, skill and diligence possessed and exercised by the ordinary attorney in similar circumstances.
The Funds claim that L&W and Levin should have known that the purchase price for each of the properties was "grossly inflated," and that they breached their duty to advise the Funds of this. The Funds further allege that they were injured as a result of L&W's and Levin's breach of their duty to exercise reasonable care, and that L&W and Levin knew or should have known that the Funds should have retained a Qualified Professional Asset Manager ("QPAM") in connection with the transactions and had a duty so to advise the Funds. Their failure to do so, plaintiffs allege, resulted in injury to the Funds.
In order to properly allege causation, the Funds must show that but for the purported negligence of L&W and Levin, they would have avoided the injuries that they allege resulted from the real estate transactions. According to the Levin Defendants, the Funds have not made the causation showing required under New York law. See, e.g., Stroock & Stroock & Lavan v. Beltramini, 157 A.D.2d 590, 591, 550 N.Y.S.2d 337, 338 (1st Dep't 1990).
It cannot be said at this juncture that the Funds have failed to state a claim for malpractice as a matter of law. The Funds may be able to demonstrate after discovery that the alleged malpractice indeed injured the Funds. The allegations with respect to the real estate transactions, the general allegations concerning the central role of the Levin Defendants in the conduct of Fund affairs, and the possibility that their acquiescence in wrongdoing was purchased through their lucrative fee-for-kickback scheme are sufficient to allege that the transactions would not have been consummated without the Levin Defendants' acquiescence.
C. No Question of Fact Exists as to Whether the Albanese Defendants Had an Attorney-client Relationship with the Funds
An essential element of the Funds' malpractice claims against the Albanese Defendants is an attorney-client relationship between those Defendants and the Funds. According to the Albanese Defendants, they served as counsel only to Anthony Zotollo, in his capacity as a Fund trustee.
An attorney may not be held liable for negligence in the provision of professional services adversely affecting one with whom the attorney is not in contractual privity. See, e.g., National Westminster Bank USA v. Weksel, 124 A.D.2d 144, 146, 511 N.Y.S.2d 626, 628 (1st Dep't 1987); Compusort, Inc. v. Goldberg, 606 F. Supp. 456, 457 (S.D.N.Y. 1985).
This privity requirement is based upon basic ethical considerations. "A primary reason for refusing to expand privity is to avoid a potential conflict since the interests of the attorney's client . . . may not be harmonious with other persons. . . ." 4 Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice § 31.4 (4th ed. 1996) (citations omitted).
To establish the existence of an attorney-client relationship, the Funds must adduce some evidence of the formation of a legally valid contract. Hashemi v. Shack, 609 F. Supp. 391, 393 (S.D.N.Y. 1984). "It is fundamental that an explicit undertaking to perform a specific task is required to establish an attorney-client relationship." Sucese v. Kirsch, 199 A.D.2d 718, 719, 606 N.Y.S.2d 60, 62 (3d Dep't 1993) (affirming dismissal of malpractice action on summary judgment where plaintiff failed to show he retained defendant as his attorney for transaction about which he was complaining).
Moreover, to withstand a motion for summary judgment, the non-moving party must comply with the requirements of Fed. R. Civ. P. 56(e), which provides in relevant part:
Opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein.
A hearsay affidavit of counsel, unsupported by other competent proof, "does not comply with Rule 56(e)." Automatic Radio Mfg. Co. v. Hazeltine Research, Inc., 339 U.S. 827, 831, 94 L. Ed. 1312, 70 S. Ct. 894 (1950). See also Accord Sellers v. M.C. Floor Crafters, Inc., 842 F.2d 639, 643 (2d Cir. 1988) ("a hearsay affidavit is not a substitute for the personal knowledge of a party"). The Funds have not met this requirement.
The Funds have not met their burden of demonstrating the existence of a question of fact as to whether the Albanese Defendants were employed as the Funds' counsel when the subject real estate transactions occurred and whether they undertook the defense of the Pension Fund or 32-36 Corp. in the Pervale Litigation. Because the Funds have not established a contractual undertaking on the part of the Albanese Defendants with respect to the matters upon which the Funds' malpractice claims are based, those claims against the Albanese Defendants will be dismissed.
The Funds have not produced any retainer agreement evidencing an attorney-client relationship with the Albanese Defendants. The Funds note that the Albanese Defendants received payment for their legal services to Zotollo from the Funds rather than from Zotollo personally. This fact, while relevant, is insufficient to raise a question of fact as to whether an attorney-client relationship existed between the Funds and the Albanese Defendants, particularly in light of the Albanese Defendants' explanation of the payment, which has not been refuted by anyone with personal knowledge.
Albanese attests that he attended trustee's meetings with Zotollo in connection with his personal representation of Zotollo, and that he submitted bills for his services directly to the Funds because he was instructed to do so by the Funds' Administrator, Ms. Audrey Hinkly. In the face of Albanese's sworn statement based on personal knowledge, the Fund's unsupported speculation regarding the meaning of the payment arrangement is insufficient to defeat summary judgment. In any event, the payment of legal fees by a third person creates no attorney-client relationship or privity between the attorney and his client's benefactor. See Priest v. Hennessy, 51 N.Y.2d 62, 69-70, 431 N.Y.S.2d 511, 515, 409 N.E.2d 983 (1980).
The Funds claim that they were ultimately the Albanese Defendants' client, as the Trustee serves the Funds. When an attorney has been retained as counsel to an individual representative of an entity, however, the attorney's client is the representative alone and not the entity or its beneficiaries:
An attorney for a trustee owes no duty to the beneficiaries of a trust. A duty to a beneficiary would conflict with the undivided loyalty owed the fiduciary to interpret legal obligations or to resolve conflicting claims. That rule is not altered merely because the attorney's compensation comes out of the trust corpus.
4 Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice § 31.4 (citations omitted). Consistent with the attorney's duty to the representative in this circumstance, neither the entity nor its beneficiaries have any right to sue the representative's attorney for professional negligence. See Kramer v. Belfi, 106 A.D.2d 615, 616, 482 N.Y.S.2d 898, 900 (2d Dep't 1984) (dismissing claims for legal malpractice brought by estate's beneficiaries against attorneys retained to represent executor only).
The Minutes of the Trustee meetings do not support the existence of an attorney-client relationship between the Albanese Defendants and the Funds until they were appointed as co-counsel to the Real Estate Committee on November 4, 1992. The Funds contend that the Minutes, which identify the Albanese Defendants only as "Attorneys for Employer-Designated Trustee, Anthony J. Zotollo," are insufficiently complete and should not be taken at face value. The Funds contend that this designation was merely a shorthand description because, although Albanese became co-counsel to the Real Estate Committee in November 1992 and joined the Investment Committee in February 1993, the Minutes did not reflect these changes. The Minutes, however, do demonstrate that it was not until November 4, 1992 that the Albanese Defendants were proposed as counsel to the Real Estate Committee, and it was not until July 7, 1993 that they were appointed as co-counsel to the Funds.
In an effort to demonstrate that the Minutes are not a complete records of the scope of various attorneys' representation, the Funds note that although C&L was listed in the Minutes only as attorneys for a particular trustee, they rendered services directly to the Funds. The Minutes, however, describe C&L as "counsel to the Real Estate Committee" during that period. In that capacity, C&L reported at each meeting between 1987 and 1990 about the status of the various real estate transactions. The Albanese Defendants, by contrast, are only referred to as counsel for Zotollo until their engagement as the Funds' counsel on November 4, 1992. The Minutes thus indicate that during the period in question the Funds were advised exclusively by their own independent counsel regarding the subject real estate transactions, and not by the Albanese Defendants.
Finally, the Funds point to the inclusion of the Albanese Defendants in certain tax forms (the "Forms 5500") prepared by the Funds' auditors as evidence that the Funds believed that the Albanese Defendants were their attorneys. But the Funds have offered no explanation of the inclusion of the Albanese Defendants among those listed in the Forms 5500, or any statement concerning the Funds' belief that the Albanese Defendants represented them. The Forms 5500 themselves establish only that the Funds reported to the IRS that payments had been made to the Albanese Defendants from Fund assets, which is consistent with the billing arrangement described above. Moreover, the Funds' belief that the Albanese Defendants were their attorneys is not sufficient to establish the existence of an attorney-client relationship. Kubin v. Miller, 801 F. Supp. 1101, 1115 (S.D.N.Y. 1992) ("Although the so-called client's subjective belief can be considered by the court . . . this belief is not sufficient to establish an attorney-client relationship."
The Funds have likewise failed to raise a question of fact as to whether the Albanese Defendants participated in the Funds' representation in the Pervale litigation. The Albanese Defendants have submitted an affidavit based on personal knowledge attesting that the initial inclusion of AA&F on the answer submitted in that litigation was unauthorized and the result of a clerical error on the part of C&L, the Funds' counsel in that matter. They have also submitted documentary proof that they corrected that mistake by filing a Consent to Withdraw as Counsel, signed by the Funds and by C&L, with the Court.
The Funds concede that they have inspected the files of defendant C&L regarding the Pervale Litigation, but have found no documents supporting the Albanese Defendants' purported representation in that case apart from the documents already submitted by the Albanese Defendants themselves on this motion. Given the absence of any evidence supporting the Funds' allegations, no question of fact exists as to the Albanese Defendants' representation of the Funds in the Pervale litigation.
The Funds' reliance on the Albanese Defendants' failure to conclusively demonstrate that they were not the Funds' counsel is insufficient to defeat summary judgment. See, e.g., Rhode Island Depositors Economic Protection Corp. v. Hayes, 64 F.3d 22, 27-28 (1st Cir. 1995) (affirming dismissal of legal malpractice claims asserted by limited partners against law firm that had represented partnership, where law firm had challenged existence of attorney-client relationship with limited partners themselves: "We conclude that the limited partners rely on nothing more than repeated conclusory assertions about the nature of their relationship with [the law firm], . . . [which are] not enough to survive summary judgment on the question of whether an attorney-client relationship actually existed."); Sheinkopf v. Stone, 927 F.2d 1259, 1268 (1st Cir. 1991) ("In the absence of any objective evidence that [defendant] undertook to act as [plaintiff's] attorney, or had agreed to do so, a contract to furnish legal services cannot be implied" and summary judgment was properly granted); Crossland Savings FSB v. Rockwood Ins. Co., 692 F. Supp. 1510, 1515 (S.D.N.Y. 1988) (summary judgment granted because the putative client "has not proffered the contract . . . or any other evidence" of an attorney-client relationship but instead relied solely on "the mere conclusory allegations in [its] memorandum").
In the face of the sworn testimony of Albanese and Zotollo, the Funds's silence is insufficient to defeat summary judgment. See Burlington Coat Factory Warehouse Corp. v. Esprit De Corp., 769 F.2d 919, 923 (2d Cir. 1985) ("the party opposing the [summary judgment] motion may not stand mute in reliance solely upon its allegations when facing a substantial evidentiary submission refuting its claim"); Moon v. Central Intelligence Agency, 514 F. Supp. 836, 839-40 (S.D.N.Y. 1981) ("In view of the fact that plaintiff's allegations are denied by affidavits of [defendant] based on personal knowledge, plaintiff's allegations will not preclude summary judgment.").
C. An Attorney-Client Relationship with the Funds Cannot Be Presumed Based on the Albanese Defendants' Representation of Zotollo
The Funds argue in the alternative that the Albanese Defendants' representation of Anthony Zotollo created an attorney-client relationship with the Funds. According to the Funds, an attorney who renders advice to an ERISA fund trustee concerning the administration of the fund is presumed to have an attorney-client relationship with the fund and/or its beneficiaries. The Funds thus contend that, even if no evidence of an attorney-client relationship exists, such a relationship can legally be presumed from the Albanese Defendants' representation of Zotollo.
The cases upon which the Funds rely, however, address only whether communications between trustees of a pension fund and their counsel are protected by the attorney-client privilege from disclosure to the fund's beneficiaries. See, e.g., Helt v. Metropolitan Dist. Comm'n, 113 F.R.D. 7 (D. Conn. 1986); Washington-Baltimore Newspaper Guild Local 35 v. Washington Star Co., 543 F. Supp. 906 (D.D.C. 1982); United States v. De Lillo, 448 F. Supp. 840 (E.D.N.Y. 1978).
The authorities cited by the Funds indicate that, notwithstanding the above-described exception to the attorney-client privilege, a trustee's status as a fiduciary does not create a presumed attorney-client relationship between the trustee's counsel and either the trust or its beneficiaries. In Weingarten v. Warren, 753 F. Supp. 491, 496-97 (S.D.N.Y. 1990), the court dismissed a claim for malpractice brought by a trust beneficiary against counsel for the trustee on the ground that, absent some special circumstances, "there is no justification for abandoning the privity requirement." The ethical opinion cited by the Funds makes the point states: "Absent specific circumstances to the contrary, beneficiaries have no attorney-client relationship with the executor's lawyer." N.Y. St. Bar Ass'n Comm'n on Professional Ethics Op. 649 at 2 n.2 (1993). Accord 4 Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice § 31.4 (1996) ("An attorney for a trustee owes no legal duty to the beneficiaries of a trust."). In Riggs Nat'l Bank v. Zimmer, 355 A.2d 709 (Del. Ch. 1976), the court explained that its decision on the issue of privilege did not stem from the notion that the trustee's attorney could be viewed, either in fact or by implication, as having represented the trust's beneficiaries:
There is no 'substantial need' [for disclosure] in the sense that the beneficiaries need to know the legal views expressed in the memorandum. They do not as they are represented by competent counsel and can get expert advice on the law. But, the beneficiaries are entitled to know what the trustees did, that is, what legal opinion was sought on their behalf and what was done in light of that opinion on their behalf.
Id. at 716.
IX. Plaintiffs Have Not Met the Requirements of Rule 56(f)
The Funds seek a continuance of this motion on the ground that they require more discovery. To such obtain relief under Rule 56(f), the party seeking additional discovery must demonstrate with specificity all of the following:
1) the nature of the uncompleted discovery, i.e., what facts are sought and how they are to be obtained; and