The opinion of the court was delivered by: Motley, District Judge.
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.
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,
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.
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
Q. What were you seeking from Rutgers?
A. $850,000 worth of equipment and the equipment
back, whatever was left.
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 ...