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PPX ENTERPRISES, INC. v. FREDERICKS

April 28, 2000

PPX ENTERPRISES, INC. AND EDWARD CHALPIN, PLAINTIFFS,
V.
BARRY I. FREDERICKS, DEFENDANT. BARRY I. FREDERICKS, COUNTERCLAIMANT, V. PPX ENTERPRISES, INC. AND EDWARD CHALPIN, COUNTERCLAIM RESPONDENTS.



The opinion of the court was delivered by: Motley, District Judge.

OPINION

This action, a counterclaim in a legal malpractice matter, was brought, pro se, by Barry I. Fredericks ("Fredericks") against his former clients, PPX Enterprises, Inc. ("PPX") and the president of PPX, Edward Chalpin ("Chalpin"), for unpaid legal fees. PPX and Chalpin, plaintiffs in the underlying matter, filed the complaint commencing the action on August 21, 1995 in the New York Supreme Court against Fredericks, alleging legal malpractice and breach of contract. Fredericks counterclaimed for unpaid legal fees. Fredericks later removed the case to the United States District Court for the Southern District of New York on the basis of diversity of citizenship.

In an earlier opinion in this case, Judge Kimba Wood dismissed plaintiffs' complaint and found that the only claim remaining for trial was Fredericks' counterclaim for legal fees relating to his work in the matter of PPX and Dimensional Sounds v. Rutgers University ("the Rutgers case"). The case was reassigned from Judge Wood to this court on August 26, 1999. The matter was tried before this court in a bench trial from November 29, 1999 to December 1, 1999.

Based on the stipulations of fact between the parties, the trial testimony and the exhibits submitted at trial, this court makes the following Findings of Fact and Conclusions of Law in favor of respondents, PPX and Chalpin.

FINDINGS OF FACT

I. THE PARTIES

2. Counterclaim Respondents ("Respondents") are an entertainment company, PPX Enterprises, Inc., and its president, Edward Chalpin. Respondent Chalpin is the president and operating officer of PPX, domiciled in the State of New York.*fn1 (Tr. at 202). Respondent PPX is a corporation which manages and represents entertainers, publishes music and produces records. PPX is incorporated in the State of New York and maintains a principal place of business in New York City. (Tr. at 342-43). Also involved in these proceedings is Dimensional Sound ("Dimensional"), a corporation which runs a recording studio. Dimensional is wholly owned by Respondent Edward Chalpin while PPX is owned by his brother, Simon Chalpin. (Tr. at 202-208, 343).

II. THE DISPUTE

A. Events Leading to the Rutgers Litigation

3. In June or July of 1986, Dimensional faced a rent increase as its 20-year lease ended at its offices on 301 West 54th Street in New York City. (Tr. at 345-46).

4. Instead of renewing the lease, in July of 1986, Chalpin entered into an agreement with Rutgers University on behalf of Dimensional and PPX for the use of office space on Rutgers' campus. (Tr. at 34546). This agreement provided PPX and Dimensional with rent-free office and storage space. (Tr. at 345-49). In accordance with the agreement, PPX and Dimensional transferred their recording equipment from the West 54th Street location to Rutgers University in exchange for allowing Rutgers to use the equipment for teaching purposes. (Tr. at 345-49). The agreement also called for PPX and Dimensional to eventually donate the equipment to Rutgers and obtain a tax benefit from the gift (Tr. at 26, 346; Ex. 1, ¶ 8).

5. In order to determine the amount of the donation to Rutgers, Chalpin had the equipment appraised by two independent appraisers. (Tr. at 349). In a June 2, 1986 letter, Charles Leighton of JAC Recording determined the fair market value of the equipment to be $850,000.00. (Trial Exhibit 4). In a June 12, 1986 appraisal, Bill Scranton of Boynton Studio assessed the value of each piece of recording equipment in the studio, calculating the equipment to be worth $815,759.00 altogether. (Ex. 5).

6. Chalpin eventually became dissatisfied with Rutgers' services and, on or about June 29, 1988, sought to terminate the contract with Rutgers. (Tr. at 350-351; Ex. 1 at ¶ 9). In terminating the agreement, Chalpin made arrangements with Rutgers for the removal of the recording equipment. (Tr. at 350-354). According to these arrangements, Chalpin was to provide trucks and workers to pick up the equipment and Rutgers was to deliver the equipment to a loading dock to facilitate the equipment removal. (Tr. at 351).

7. Chalpin scheduled multiple pickups under this arrangement from the time of the termination of the original agreement until 1991. (Tr. at 351-353). In a January 25, 1991 letter to Chalpin, Virgina Record, Associate Provost at Rutgers, acknowledged that Chalpin had picked up "most of the workable equipment," and requested that he promptly remove the remaining equipment. (Ex. E). Between January and June of 1991, Chalpin continued to pick up equipment from Rutgers, creating an inventory of items removed for most of the pick-ups. (Ex. G, H, I, J, M, N, R). In a handwritten note accompanying the March 31, 1991 inventory, Chalpin commented that some of the equipment at Rutgers was dirty, damaged and carelessly piled together. (Ex. N).

8. Chalpin did not remove all of the equipment from Rutgers during the 1991 pickups. (Tr. at 362). Between January and July of 1991, Rutgers sent Chalpin several letters complaining that a significant amount of equipment had been left at Rutgers, demanding that Chalpin remove the remaining equipment. (Ex. E, K, L, P).

B. The Filing of Dimensional Sound, Inc., and PPX Enterprises v. Rutgers University

9. In late 1991, Chalpin retained the firm of Rudd, Rosenberg, Mitofsky & Hollender ("Rudd") to represent PPX and Dimensional in an action against Rutgers for conversion and breach of contract. (Ex. A, D).

10. In a October 10, 1996 deposition in the instant case, Chalpin briefly described the relief he was seeking from the Rutgers lawsuit:

Q. What were you seeking from Rutgers?

A. $850,000 worth of equipment and the equipment back, whatever was left.

(Tr. at 228-229).

11. Mr. Lindsay Rosenberg was the partner from the Rudd firm assigned to represent PPX and Dimensional in the Rutgers case. (Tr. at 16-18). Mr. Rosenberg interviewed the client, supervised the case and worked on the complaint. (Tr. at 18). During the representation, Chalpin told Mr. Rosenberg that he was seeking $850,000 in damages for the equipment that Rutgers was holding, as Mr. Rosenberg testified at trial:

Q. (record read) Does that line refresh your recollection as to whether you had any information about whether or not Rutgers was pressing for the removal of the equipment?
A. I believe it does. My recollection is that Mr. Chalpin had told me that he was trying to get his equipment and ...

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