The opinion of the court was delivered by: Motley, District Judge.
Plaintiffs, Harish and Indira Pal, filed this legal malpractice action
against defendants, Gary Sinclair ("Sinclair") and Swift, Popuch &
Sinclair ("Swift") on March 27, 1998. Plaintiffs, New York residents, are
former clients of defendants, who represented plaintiffs in proceedings
before the United States District Court in the Northern District of
Illinois and in administrative proceedings before the Commodity Futures
Trading Commission ("CFTC"). Defendant Swift is a law firm with offices
in Chicago, Illinois. Defendant Sinclair is a named partner in the Swift
law firm. Plaintiff alleges legal malpractice and fraud on the part of
defendants. Defendants counterclaim for fraud and unpaid legal fees.
Defendants filed a motion for summary judgment as to all of plaintiffs'
claims and as to defendants' claim for unpaid legal fees. The court now
grants defendants' motion, dismissing plaintiffs' claims with prejudice,
and awarding the unpaid legal fees to defendants.
Plaintiffs retained the defendants on June 28, 1995 on a mixed hourly
fee and contingency fee basis to represent them in an action filed
against plaintiffs in the United States District Court in the Northern
District of Illinois. Defs.' Mem. Supp. Summ. J. Ex. 1. The underlying
action involved a commodities futures account ("the Refco Account") held
in the names of both plaintiffs, who are husband and wife. Am. Compl.
¶¶ 1-7. Prior to the underlying proceedings, plaintiffs maintained a
commodities account with Refco, Inc. ("Refco"). Am. Compl. ¶¶ 12. In
1995, the account became undermargined and plaintiffs failed to satisfy
the margin call. Pls.' Resp. Defs.' 56.1 Stmt. ¶ 25.*fn1 Refco then
liquidated the account, causing a loss to plaintiffs of approximately
$1.2 million in capital and leaving a deficit balance in the Refco
account of approximately $347,787.50. Pls.' Mem. Opp'n Summ. J. at 1.
When plaintiffs failed to pay the deficit, Refco filed a breach of
contract action against plaintiffs to collect the debit balance in the
U.S. District Court of the Northern District of Illinois. Am. Compl.
Plaintiffs retained defendants to defend them in the collection suit.
Am. Compl. ¶ 29. Additionally, plaintiffs asked defendants to pursue
churning and wrongful liquidation claims against Refco and related
parties to recover the losses resulting from the liquidation of the Refco
account. Def's Mem. Supp. Summ. J. at 2. Originally, plaintiffs intended
to assert their claims in an arbitration proceeding before the National
Future Association ("NFA") and attempt to stay the collection suit
pending the outcome of the arbitration, or, alternatively, to remove the
matters pending in federal court to the NFA and consolidate the cases.
Pls.' Resp. Defs.' 56.1 Stmt. ¶ 30. The parties ultimately agreed
that Refco would withdraw its civil complaint in the U.S. District Court
and that the parties would instead bring the matters before an
administrative law judge at the Commodity Futures Trading Commission
("CFTC"). Pls.' Resp. Defs.' 56.1 Stmt. ¶ 32; Am. Compl. ¶ 41.
Defendants represented plaintiffs in a hearing at the CFTC on August
21, 199-3. After the hearing and submission of posthearing briefs by the
parties. Administrative Law Judge George H. Painter dismissed plaintiffs'
complaint, awarded respondents the debit balance with interest and denied
respondents' counterclaim for costs and attorneys fees. Defs.' Mem.
Supp. Summ. J. Ex. B. Thereafter, plaintiffs discharged defendants and
hired a new law firm to proceed with the CFTC appeal. Am. Compl. ¶
73. On appeal, the dismissal of plaintiffs complaint was affirmed and the
denial of attorneys' fees and costs was reversed. Defs.' Mem. Supp.
Summ. J. Ex. C. Subsequently, plaintiffs filed this suit against
defendants alleging fraud and malpractice.
Plaintiffs filed the complaint in this action on March 27, 1998,
alleging several claims of malpractice against defendants. On April 9,
1998. plaintiffs filed an amended complaint, adding fraud claims and
additional malpractice causes of action. In their amended complaint,
plaintiffs invoke jurisdiction pursuant to 28 U.S.C. § 1332. alleging
that there is complete diversity between plaintiffs and defendants and
that the amount in controversy exceeds $100,000.*fn2 On June 15, 1998,
defendants filed an answer and counterclaim, alleging counterclaims for
breach of contract and fraud.
Defendants filed a motion for summary judgment on July 9, 1999, seeking
summary judgment with respect to the entire amended complaint and the
counterclaim for breach of contract. The case was transferred from Judge
Wood to this court on August 28, 1999. Both parties have fully briefed
the motion and have appeared before this court in a hearing. In
accordance with the discussion below, the court hereby grants defendants'
motion for summary judgment, dismissing plaintiffs' claims with prejudice
and ordering plaintiffs to repay legal fees owed to defendants.
A. Summary Judgment Standard
Summary judgment is instrument which allows a court to "[s]treamline
the process for terminating frivolous claims and to concentrate its
resources on meritorious litigation." W.A. Knight v. U.S. Fire Insurance
Co., 804 F.2d 9, 12 (2d Cir. 1986). Rule 56 of the Federal Rules of Civil
Procedure provides that summary judgment is proper where "[t]he
pleadings, depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is entitled to
judgment as a matter of law." Fed.R.Civ.P. 56(c); See Celotex Corp. v.
Catrett, 477 U.S. 317, 322, 106 8.Ct. 2548, 91 L.Ed.2d 265 (1986); Lipton
v. Nature Company, 71 F.3d 464, 468 (2d Cir. 1995). A genuine issue of
material fact is present if the fact "[w]ill affect the outcome of the
suit under governing law" and the supporting evidence is "[s]uch that a
reasonable jury could return a verdict for the nonmoving party." Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d ...