Federal Correctional Institute in Bradford, Pennsylvania.
Giving the complaint a fair reading, it appears that it alleges first
that HPP issued fraudulent billing to him for services that were never
provided (Compl. at ¶¶ 16, 43-49); second that HPP fraudulently
induced Hoffenberg to "write a letter about the over one million dollars
advanced to HP by Pro Se," which appears to refer to a letter dated May
29, 1996 in which Hoffenberg released all claims he had against HPP. Id.
at ¶ 18; third, that HPP committed malpractice and breached their
fiduciary duty not only throughout the course of HPP's representation of
Hoffenberg, Id. at ¶ 41, but also in connection with the monies set
aside for legal services by a consent judgment entered against
Hoffenberg. The complaint alleges that HPP took a $450,000 set aside from
a third party and colluded with a third party, forcing Hoffenberg to
enter into an adverse agreement for HPP's benefit. Id. at ¶¶ 1942.
On September 9, 2001, Hoffenberg was granted an additional forty-five
days to serve HPP. A letter from HPP of June 13, 2000 acknowledging
receipt of a complaint from Hoffenberg was addressed to the judge to whom
the action had previously been assigned. An affidavit of service dated in
June 2000, was received on October 3, 2001. On November 14, 2001, the
action was dismissed in error as a result of overlooking the recently
received June 2000 affidavit. On May 14, 2002, the Second Circuit vacated
the dismissal and remanded the case to consider whether service was
proper. Hoffenberg v. Hoffman Pollok & Pickholz. LLP, No. 01-9427 (2d
Cir. 2002). HPP in its instant motion acknowledges the efficacy of
service. On May 20, 2002, Hoffenberg filed a motion to recuse this Court
which was denied on October 30, 2002.
Hoffenberg has been a party to actions in this district since February
1993 when the Securities and Exchange Commission ("SEC") commenced a
civil action against him and others. SEC v. Towers Fin. Corp., No. 93
CIV. 0744 (WK) (AJP), 1996 WL 406685, at *1 (S.D.N.Y. Mar. 26, 1996).
Hoffenberg was formerly Chief Executive Officer ("CEO") and Chairman of
the Board of Towers Financial Corporation ("Towers"). Towers filed for
bankruptcy in March 1993. In October 1994, the Bankruptcy Trustee for
Towers obtained a civil judgment against Hoffenberg and other officers of
Towers on consent in the amount of $400,000,000, plus a separate judgment
in the amount of $8,050,000.
On February 17, 1993, Hoffenberg and others agreed to a preliminary
injunction in the SEC action that enjoined him from dissipating assets,
exempting Hoffenberg's living expenses and reasonable attorney's fees. In
October 1994, the SEC obtained a final judgment against Hoffenberg
incorporating the terms of the 1993 asset freeze.
A criminal action was commenced against Hoffenberg and others for
conspiracy during 1991 and 1992 to obstruct the SEC's investigation,
United States v. Hoffenberg, Nos. 94 Cr. 213 (RWS), 95 Cr. 321 (RWS),
1997 WL 96563, at *6 (S.D.N.Y. Mar. 5, 1997). Hoffenberg pled guilty on
April 20, 1995 to five criminal counts: (1) conspiracy to violate the
securities laws by fraudulently selling securities; (2) mail fraud; (3)
conspiracy to obstruct justice; (4) tax evasion; and (5) mail and wire
fraud. His motion to withdraw this plea was subsequently denied. United
States v. Hoffenberg, 169 F.R.D. 267, 268 (S.D.N.Y. 1996). He received a
sentence of 240 months in prison and was required to make restitution of
$475,157,340, a judgment which was affirmed. United States v.
Hoffenberg, 164 F.3d 620 (2d Cir. 1998)
In December 1999, Hoffenberg, having sought a review of his conviction
under 28 U.S.C. § 2255, filed a motion to recuse this Court on the
basis of a conflict of interest, which was denied as was the petition for
review. Hoffenberg v. United States, 2000 WL 1523142, at *1 (S.D.N.Y.
Oct. 13, 2000). The Honorable Thomas P. Griesa, in reviewing Hoffenberg's
§ 2255 motion, held that the "motion raised no constitutional grounds
for attacking Hoffenberg's criminal convictions that could properly be
construed as a § 2255 motion." Id. (citing Hoffenberg v. United
States, No. 00 Civ. 1686 (TPG) (S.D.N.Y. March 6, 2000)). On August 8,
2000, Hoffenberg filed another recusal motion in connection with his
effort to review his convictions under 28 U.S.C. § 144, 455, which
was denied on October 13, 2000. The court directed that "any appeal from
this order, or from my order of January 28, 2000 denying his prior
recusal motion, would not be taken in good faith." Hoffenberg, 2000 WL
1523142, at *3.
In December 2000, Hoffenberg filed a legal malpractice action against
Daniel Meyers, a court-appointed attorney who represented Hoffenberg from
April 1996 to March 1997, following HPP's withdrawal. The action alleged
that Meyers had failed to achieve a withdrawal of Hoffenberg's guilty
plea and to challenge the prior $450,000 set aside in favor of HPP which
was contained in the consent judgment. Hoffenberg v. Meyers, No. 99 CIV.
4674 RWS, 2002 WL 57252, at *1. Meyers' motion for summary judgment
dismissing Hoffenberg's amended complaint was granted on January 16,
The following recital of background facts are gleaned from the court
proceedings and the submissions of HPP and do not constitute findings of
fact relied upon in the substantive discussion which follows this
On April 19, 1993, Hoffenberg executed a formal retainer agreement with
HPP, for the purposes of his representation in both pending and future
civil and criminal matters against him. Since Hoffenberg's assets had
been frozen by the SEC, the funding of the retainer was subject to SEC
approval which was granted.
During the first quarter of 1994, the initial retainer had been
exhausted. HPP's predecessor then made an application to the SEC for the
payment of additional funds by notice sent which contained the details of
the legal services provided with work sheets and time slips. Payment was
On October 25, 1994, Hoffenberg consented to entry of a final judgment
against him and various entities he controlled with the Towers Trustee.
The consent judgment was a product of negotiations between Hoffenberg and
his counsel, HPP, the Trustee, counsel for the Trustee and the SEC. It
provided that the defendants named, including Hoffenberg and Towers,
agreed to pay $400,000,000 to the creditors of Towers, which represented
the losses resulting from Hoffenberg's fraud, ultimately found to be
$475,157,340. The consent judgment also provided that pre-judgment
interest of $108,000,000, which constituted a portion of the funds
restrained by the SEC, be transferred to the Trustee in partial
satisfaction of the $400,000,000 judgment. The transfer of these funds to
the Trustee was subject to approval by the SEC.
Under the terms of the consent judgment, HPP received $450,000 to be
held in escrow for legal services, which were subsequently to be provided
(the "Set Aside"). (Consent J. Against Steven Hoffenberg and TFC Mgmt.,
No. 94-8055A at ¶ V
(Oct. 25, 1994).) Part V of the consent judgment stated:
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the Trustee shall
transfer $450,000 to two interest-bearing Accounts at Republic National
Bank with the law firm of Hoffman & Pollok, as signatories, $200,000
to one account ("Account A") and $250,000 to the other account ("Account
B"). Both accounts A and B shall be used solely for providing legal
services to Hoffenberg by Hoffman & Pollok, and any amounts not spent
on fees for legal services actually rendered shall be remitted to the
Trustee. Funds in Account A may be used for legal representation
(including attorneys' fees and expenses) of Hoffenberg in any criminal
actions now pending against him. Hoffman & Pollok shall remit to the
Trustee any unspent funds in Account B, plus related interest, within
thirty (30) business days after the completion of all legal
representation now pending against him in the Southern District of New
York and the Northern District of Illinois. Hoffman & Pollok shall
remit to the Trustee any unspent funds from Account A within ten days
after the termination of all civil litigation or twenty-four (24) months
from the execution of this Agreement whichever is earlier.
Hoffman & Pollok shall provide the Trustee with monthly statements
from the Accounts, along with Hoffman & Pollok's monthly invoices for
legal services rendered to Hoffenberg. If the necessity arises, funds may
be transferred from Account A to Account B and/or Account B to Account
The Trustee shall review for reasonableness the monthly invoices within
five (5) business days of receipt from Hoffman & Pollok and approve
the invoices, in writing, in whole or in part.
Hoffman & Pollok shall withdraw funds from the account and/or
transfer funds between accounts only upon written authorization of the
Trustee, but the Trustee shall not unreasonably withhold his
authorization. Any and all disputes as to the reasonableness of any
invoices shall be adjudicated by the United States Bankruptcy Court for
the Southern District of New York.
Hoffenberg waived any right to appeal the consent judgment and attested
that he entered into the consent judgment voluntarily, acknowledging that
"no tender offer, promise, or threat of any kind has been made by Trustee
or any of their officers, agents, or representatives, in consideration of
this Consent," and that the consent embodied the entire understanding of
all parties thereto. (Consent J. Against Steven Hoffenberg and TFC
Mgmt., No. 94-8055A at ¶ 4.) The consent judgment was entered by the
Honorable Whitman Knapp on November 2, 1994.
Pursuant to the consent judgment, HPP submitted invoices and back-up
work sheets to the Trustee for his approval. In early 1995, the Trustee
was replaced, but HPP's invoices continued to be approved by the new
trustee and his counsel. HPP's submitted invoices for February, March and
June 1996, totaling $51,341.96, were declined approval. However, this
dispute was settled with approval from the Bankruptcy Court, and HPP
returned $96,890.96 on December 20, 1996 to the trustee. This represented
the unused criminal portion of the $450,000 Set Aside allocated to them
by the consent judgment.
On April 11, 1996, HPP moved to be relieved as counsel for Hoffenberg
for all civil actions, Hoffenberg having alleged "wrong doing by our firm
[HPP], ineffective assistance of counsel, threatened law suits against
our firm and requests to the United States Attorneys Office to
investigate us [HPP] for potential criminal prosecution." SEC v. Towers
Fin. Corp., 1996
WL 288176, at *2 (S.D.N.Y. May 31, 1996) (Opinion and
Order of Magistrate Judge Peck granting withdrawal). HPP had previously
been relieved as Hoffenberg's counsel in the related criminal cases,
where Hoffenberg "accused his counsel of being ineffective in both the
criminal and civil cases." Id. at 1. On April 16, 1996, while HPP's
withdrawal motion was pending, Hoffenberg alleged that HPP committed
malpractice in connection with its receipt of funds under the consent
judgment, as well as contesting HPP's billings against the $800,000
retainer payment to HPP. However, on May 29, 1996, in a letter to
Bankruptcy Judge Abrams, Hoffenberg withdrew these claims, in writing:
I accept the legal work provided by Hoffman & Pollock
[sic]. I have no dispute with the work and money paid to
Hoffman & Pollok. All work provided to me has been
billed and paid for to date. Any and all claims made by
me have been withdrawn. I am requesting everybody
involved in our cases to understand that the dispute over
money between Hoffman & Pollock [sic] and I have been
This letter is referenced in the complaint herein and is quoted and/or
referenced by Magistrate Judge Peck and Honorable Whitman Knapp in their
decisions granting HPP's withdrawal.
On May 31, 1996, Magistrate Peck recommended the granting of HPP's
withdrawal based on HPP's assertion that although "none of these
allegations contained in these letters are even remotely true, they have
created a gulf between Hoffenberg as client and Hoffman & Pollok as
attorneys which cannot be bridged." SEC 1996 WL 288176, at *2. In
reviewing Magistrate Judge Peck's recommendation, Judge Knapp
acknowledged that the court had received letters both accusing HPP of
ineffective assistance of counsel and insisting that all conflicts
between the parties had been resolved before Magistrate Peck had
recommended withdrawal. SEC v. Towers Fin. Corp., No. 93 CIV. 0744 (WK)
(AJP), 93 CIV. 0810 (WK) (AJP), 1996 WL 383238, at *1 (S.D.N.Y. Jul. 8,
1996). In addition, after Magistrate Peck's recommendation, Judge Knapp
received another letter from Hoffenberg "directly insisting that he
[Hoffenberg] has no quarrel with Hoffman & Pollok, and that he wants
them to continue to represent him in the civil cases." Id. Judge Knapp
adopted Magistrate Judge Peck's recommendation in its entirety on July
8, 1996, thereby relieving HPP from representation.
On November 8, 1996, Hoffenberg filed a complaint against HPP with the
Departmental Disciplinary Committee of the Appellate Division, First
Department (Steven Hoffenberg' s Disciplinary Compl., No. 96.3406 (Nov.
5, 1996)) alleging that he was forced to sign the consent judgment when
there was no proof he owed any money to creditors. In addition,
Hoffenberg claimed he was not provided with legal bills representing
$1,225,000 in retainer fees. Although Hoffenberg had acknowledged that he
had no quarrel with HPP's services as late as May 1996, he,
nevertheless, demanded an accounting. On April 17, 1998, HPP was informed
that the Disciplinary Committee closed the file on the matter and would
not take any further action.
The Claim of Fraudulent Billing is Untimely
Although Hoffenberg's complaint is to be read liberally, this does not
prevent dismissal where the issue presented is one of law as Hoffenberg
himself well knows. 100,000 Victim Families Note Holders Owners of Sec.
in Towers Fin. Corp. v. Schulte Roth & Zable, 210 F. Supp.2d 286
(S.D.N.Y. 2001) (dismissing Hoffenberg's complaint for failing to
or state a claim upon which relief could be granted
after having been given an opportunity to cure his complaint); Levin v.
Chase Manhattan Bank Corp., No. 98-CV-7998 (JG), 1999 WL 669261, at *1
(E.D.N.Y. Aug. 24, 1999) (dismissing pro se's complaint on basis of res
judicata and failure to state a claim); Brown v. Croce, 967 F. Supp. 101
(S.D.N.Y. 1997) (granting summary judgment where, although court
construed pro se's claim generously, pro se did not establish claim).
The statute of limitations for a claim of fraud is six years from the
commission of the fraud or two years from the time of discovery,
whichever is later.*fn1 N.Y. C.P.L.R. § 213(8) (West 2002) ("§
218(8). Actions commenced within six years: . . . 8. An action based upon
fraud; the time within which the action must be commenced shall be
computed from the time the plaintiff or the person under whom he claims
discovered the fraud, or could with reasonable diligence have discovered
it."); N.Y. C.P.L.R. § 203(g) (West 2002); Phillips v. Levie,
593 F.2d 459, 462 n. 12 (2d Cir. 1979) ("Section 213(8) is not the sole
statute involved in determining the New York limitations period for fraud
actions. N.Y. C.P.L.R. § 203(f) must also be consulted . . . . When
sections 213(8) and 203(f) are read together, they have been construed to
mean that in fraud actions suit must be commenced within six years after
the commission of the fraud or within two years of the date the fraud was
or should have been discovered, whichever is longer.); Hoff Research
& Dev. Labs., Inc. v. Philippine Nat'l Bank, 426 F.2d 1023, 1025 n.l
(2d Cir. 1970) ("[T]hese sections together have been held to yield . . .
the six years from accrual or two years from discovery rule for actual
fraud actions."); Bader v. Fleschner, 463 F. Supp. 976, 981 (S.D.N.Y.
1978) (citing both § 213(8) and § 203(g)'s predecessor).
Hoffenberg asserts that HPP issued fraudulent legal bills on June 26,
1996, alleging that on that day he received a bill, which included an
entry for August 31, 1993 in the amount of $150,000, for which he claims
legal services were never provided. Additionally, Hoffenberg has alleged
that all billing provided on June 26, 1996 was inflated.
Reading the complaint as liberally as possible, the claim of fraud
accrued on August 31, 1993, the date of the commission of the
wrongdoing, and expiry on August 21, 1999, six years later. Id. at
¶¶ 45-48; see also Ackerman v. Nat'l Property Analysts, Inc.,
887 F. Supp. 494, 504 (S.D.N.Y. 1992) (time barring, under the six-year
statute of limitations, fraud claims of all plaintiffs who invested in
limited partnerships prior to December 19, 1985, where complaint was
filed on December 19, 1991). Alternatively, the claim accrued upon
Hoffenberg's discovery of the inflated legal bills on June 26, 1996.
Under the discovery method of CPLR § 2O3(g), the statute of
limitations accrued on June 26, 1996 and expiry on June 26, 1998, two
years later. Stull v. Bayard, 561 F.2d 429, 431 (2d Cir. 1977), cert.
denied, 434 U.S. 1035, 98 S.Ct. 769 (1978) (time barring claim under
discovery method). Thus, Hoffenberg's claim of fraudulent billing is
time-barred under N.Y. C.P.L.R. §§ 218(8) and 203(g) and is,
The Claim of Malpractice Is Untimely
The statute of limitations for a claim of legal malpractice is three
years. N.Y. C.P.L.R. § 214(6) (West 2002) ("§ 214(6). Actions to
be commenced within three years: . . . 6. [A]n action to recover damages for
malpractice, other than medical, dental or podiatric malpractice . . .");
DeCarlo v. Ratner, 204 F. Supp.2d 630, 634 (S.D.N.Y. 2002); Shumsky
v. Eisenstein, 96 N.Y.2d 164, 165, 726 N.Y.S.2d 365, 366 (N.Y. Ct. App.
2001) Claims of breach of fiduciary duty are also governed by a threeyear
statute of limitations. Nobile v. Schwartz, 2000 WL 1753036, at *6
(S.D.N.Y. Nov. 29, 2000); see also Cooper v. Parsky, 140 F.3d 433,
440-441 (2d Cir. 1998) (stating claim for breach of fiduciary duty would
be governed by a three-year limitations period). The cause of action
accrues and the limitations period starts running from the time the
malpractice is committed, not when the client discovers it. DeCarlo,
204 F. Supp.2d at 635; Shumsky, 96 N.Y.2d at 166, 726 N.Y.S.2d at 367.
Hoffenberg has alleged that HPP committed malpractice and breach of
fiduciary duty in connection with the consent judgment (Compl. at ¶¶
20-21, 23-40) and throughout the course of their representation of
Hoffenberg. Id. at ¶ 41. The statute of limitations for malpractice
and breach of fiduciary duty in connection with the consent judgment
accrued from October 25, 1994, the date the judgment was entered and the
time at which HPP committed the actions, and expiry on October 25, 1997,
at the termination of the three-year time limit. DeCarlo, 204 F. Supp.2d
at 635 (time barring malpractice claim where alleged injury took place on
November 10, 1998, but action was not filed until November 14, 2001);
Nobile, 2000 WL 1753036, at *7 (time barring plaintiff's legal
malpractice claim where alleged injury took place on March 7, 1995 and
action was not commenced until August 16, 2000). Thus, Hoffenberg's legal
malpractice claim and claim for breach of fiduciary duty are
Even if the statute of limitations is deemed not to run until July 31,
1996, when HPP was discharged, the three-year limitations period expiry
on July 31, 1999. Thus, under any circumstances, Hoffenberg's claim is
time-barred under 214(6) and, therefore, dismissed.
Failure to Plead Fraudulent Inducement
Hoffenberg has asserted that he was fraudulently induced into entering
into the consent judgment with HPP so it could receive the retainer.
Under New York law, a claim of fraudulent inducement requires proof,
(1) that the defendant made a representation, (2) as to
a material fact, (3) which was false, (4) and known to be
false by the defendant, (5) that the representation was
made for the purpose of inducing the other party to rely
upon it, (6) that the other party rightfully did so rely,
(7) in ignorance of its falsity (8) to his injury.
Computerized Radiological Servs. v. Syntex Corp., 786 F.2d 72, 76 (2d
Cir. 1986) (quoting Brown v. Lockwood, 432 N.Y.S.2d 186, 193 (1980); see
also Furniture Consultants, Inc. v. Datatel minicomputer Co., No. 85
CIV. 8518 (RLC), 1986 WL 7792, at *6 (S.D.N.Y. Jul. 10, 1986). In
addition, Rule 9(b) requires that in pleading fraud, "the circumstances
constituting fraud or mistake shall be stated with particularity.
Malice, intent, knowledge, and other condition of mind of a person may be
averred generally." Fed.R.Civ.P. 9(b). Therefore, "[t]o satisfy the
Particularity requirement of Rule 9(b), a complainant must adequately
specify the statements it claims were false
or misleading, give
particulars as to the respect in which plaintiff contends the statements
were fraudulent, state when and where the statements were made, and
identify those responsible for the statements." Cosmas v. Hassett,
886 F.2d 8, 11 (2d Cir. 1989).
Even reading the complaint liberally, Hoffenberg fails to state a claim
for fraudulent inducement with sufficient particularity. He alleges that
"on or about May 29, 1996, HP acted with fraud in the inducement with Pro
Se to have Pro Se write a letter about the over one million dollars
advanced to HP by Pro Se." (Compl. at ¶ 18.) Rule 9(b)'s
requirements are designed "to provide defendant with fair notice of
plaintiff's claim," and Hoffenbergs reference to this incident does not
constitute proper notice under the statute. Cosmas, 886 F.2d at 11.
In addition, the surrounding circumstances of this letter in no way
show Hoffenberg's detrimental reliance. Furniture, 1986 WL 7792, at *1
(dismissing fraudulent inducement claim for failure of particularity
where plaintiff did not provide in complaint any descriptions of how
fraudulent inducement took place). The May 29, 1996 letter written to
Judge Abrams, in which he releases his claims against HPP and states, "I
have no dispute with the work and money paid to Hoffman & Pollock
[sic]," was written by Hoffenberg while in prison. This letter was also
sent to this Court, Judge Knapp, Judge Peck, and the then United States
Attorney Mary Jo White, an action which evidences Hoffenberg's use and
beneficial reliance on the letter. Therefore, since neither harm nor
benefit stemming from Hoffenberg's use of the letter can be attributed to
Hoffenberg in any way possible, the connection between HPP and any
fraudulent inducement of Hoffenberg is absent.
By failing to meet the burden of proof for fraudulent inducement under
New York law and to plead his claim with sufficient Particularity under
rule 9(b), Hoffenberg's claims are dismissed.
The complaint is dismissed on grounds of the statute of limitations and
failure to plead fraudulent inducement. Leave is granted to file an
amended complaint with respect to the latter ground only.
It is so ordered.