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HATFIELD v. HERZ

June 25, 1998

JOHN B. HATFIELD, JR., Plaintiff, against STUART M. HERZ, Defendant. STUART M. HERZ, Third-Party Plaintiff, - against - HAAS, GREENSTEIN, COHEN, GERSTEIN & STARR, P.C., Third-Party Defendant.

Peter K. Leisure, U.S.D.J.


The opinion of the court was delivered by: LEISURE

OPINION AND ORDER

LEISURE, District Judge :

 Third-party defendant Haas, Greenstein, Cohen, Gerstein & Starr, P.C. ("Haas" or the "Haas law firm") moves to stay and sever the third-party action instituted against it by defendant/third-party plaintiff Stuart M. Herz ("Herz"). Plaintiff John B. Hatfield, Jr. ("Hatfield") filed a Complaint in this Court alleging legal malpractice by Herz, his attorney in an earlier action. Herz then instituted a third-party action against Haas for indemnification and/or contribution. For the reasons stated below, the Haas law firm's motion to stay and sever the third-party action is denied.

 BACKGROUND

 The instant motion is the latest development in a series of three separate cases arising out of the same set of events. The three cases are:

 
(1) an action in state court for business extortion, initiated by Alexander Miliken, naming Hatfield as a defendant (the "Miliken Action");
 
(2) an action in state court for legal malpractice, initiated by Hatfield against the Haas law firm; and
 
(3) the instant action for legal malpractice, initiated by Hatfield against Herz.

 In the Miliken Action, Miliken alleged that Hatfield and other board members and shareholders of a cooperative apartment corporation (the "Co-op") improperly had attempted to prevent Miliken from subleasing his unit of the Co-op. In May of 1993, Justice Walter Tolub presided over a bench trial in the Miliken Action and decided in favor of Miliken. Justice Tolub found the defendants liable for $ 8,500 in compensatory damages as well as plaintiff's attorney's fees, which were not fixed. He also assessed $ 50,000 in punitive damages against Hatfield individually.

 Herz represented the defendants at trial. Hatfield then replaced Herz, hiring the Haas law firm to handle his appeal of Justice Tolub's decision. It is undisputed that the Haas law firm failed to file the appeal within the allotted time period (see Report of Referee, Index No. 14799-92, at 4), and that the Appellate Division dismissed Hatfield's appeal on September 22, 1994. In July of 1997, Justice Tolub ruled that the defendants in the Miliken Action were responsible for plaintiff's attorneys' fees in the amount of $ 115,510. Hatfield then filed a Notice of Appeal, contesting the award of attorneys' fees and renewing his appeal of Justice Tolub's prior awards of compensatory and punitive damages. On February 19, 1998, the Appellate Division denied the appeal as moot, having been dismissed previously.

 On July 15, 1996, Hatfield initiated in New York State Supreme Court an action against Haas for legal malpractice. See N.Y. Sup. Ct. Index No. 96-112533. Hatfield asserted that Haas should be found liable for its failure to file a timely appeal in the Miliken Action. The suit currently is pending in state court.

 On July 23, 1996, Hatfield filed a Complaint in this Court, alleging that Herz had committed legal malpractice in connection with his representation of Hatfield in the Miliken Action. Herz denied Hatfield's allegations and asserted as an affirmative defense that any damages sustained by Hatfield were caused in whole or in part by the conduct of third parties not within Herz's control. See Answer, PP 30-31. Herz then filed a third-party Complaint against the Haas law firm, claiming that Haas must indemnify Herz or contribute to any damages for which Herz is held liable because such damages resulted from the Haas's failure to file a timely appeal in the Miliken Action. Haas now moves to stay and sever the third-party action.

 DISCUSSION

 I. HAAS'S MOTION FOR A STAY OF THE THIRD-PARTY ACTION

 As the United States Supreme Court has instructed, federal courts have a "virtually unflagging obligation . . . to exercise the jurisdiction given them." Colorado River Water Conservation District v. United States, 424 U.S. 800, 817, 47 L. Ed. 2d 483, 96 S. Ct. 1236 (1976). Even when there is a concurrent action in state court, the Supreme Court has ruled that "'the pendency of an action in the state court is no bar to proceedings concerning the same matter in the Federal court having jurisdiction . . . .'" Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 15, 74 L. Ed. 2d 765, 103 S. Ct. 927 (1983)(quoting Colorado River, 424 U.S. at 818). However, under exceptional circumstances, a federal district court may stay the federal proceeding if the existence of a concurrent state proceeding mandates a stay in order to achieve wise judicial administration. See Cone, 460 U.S. at 15. The circumstances under which a stay is granted must be "extraordinary and narrow". Colorado River, 424 U.S. at 813. There exists a heavy presumption against staying the federal action. See Cone, 460 U.S. at 16.

 As set forth by the Court of Appeals for the Second Circuit, the factors relevant to determining whether to stay a federal action ...


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