United States District Court, S.D. New York
February 25, 2004.
FTI CONSULTING, INC., Plaintiff, -against- A. CAL ROSSI, JR., BASIC CAPITAL MANAGEMENT, INC., and GENE PHILLIPS, Defendants
The opinion of the court was delivered by: ROBERT SWEET, Senior District Judge Page 2
Plaintiff FTI Consulting, Inc. ("FTI") has moved for partial summary
judgment pursuant to Fed.R.Civ.P. 56, against defendant A. Cal Rossi,
Jr. ("Rossi") and Basic Capital Management, Inc. ("BCM"). For the reasons
set forth below, FTI's summary judgment motion is granted.
The law firm of Lankier, Siffert & Wohl LLP ("LSW") was hired by
defendant Rossi, the vice president of defendant BCM, to represent him on
charges of racketeering and racketeering conspiracy, as well as other
serious violations of federal laws for which convictions would have
resulted in substantial prison terms. LSW and Frank H. Wohl ("Wohl"), a
member of LSW, engaged several experts, including FTI, to assist in the
defense. On February 13, 2002, after more than three months of trial,
Rossi was acquitted of all charges.
LSW and several of the experts, excluding FTI, filed suit on December
19, 2002, for non-payment of attorney's fees and other related fees.
Defendants cross-moved to disqualify Wohl from representing the
plaintiffs. Defendants' motion to disqualify was denied, and plaintiffs'
motion for partial summary judgment was granted. See Lankier Siffert
& Wohl v. Rossi, 287 F. Supp.2d 398, 408 (S.D.N.Y. 2003)
FTI filed suit against Rossi, BCM and Phillips on June 3, 2003. On
September 3, 2003, FTI filed a motion for partial summary judgment based
only on Count II of their complaint, an account stated claim for a
remaining balance of $202,840.82 plus interest claimed to be owed to FTI
by Rossi and BCM. Rossi and BCM cross-moved to disqualify Wohl from
representing FTI on October 20, 2003. After submission of briefs, both
motions were deemed fully submitted on November 5, 2003.
According to FTI and Wohl, who is counsel for FTI in the present suit,
LSW and defendant Phillips' counsel engaged FTI in or about June 2001, at
Rossi's and Phillips' request, and with their approval, to conduct an
independent analysis of various transactions, documents, transcripts and
other matters that the government claimed were improper. FTI sent
invoices for the amount of services performed and moneys due FTI, dated
January 14, 2002 in the amount of $78,542.43 and February 13, 2002, in
the amount of 124, 298.39, to Wohl. Prior balances owed FTI were paid by
BCM on behalf of Rossi. Wohl then sent the invoices to Rossi and BCM on
or about February 4, 2002 and February 20, 2002. Since in or about
February 2002, the month of Rossi's acquittal, there has been no payment
on these accounts. According to FTI, no objection by Rossi over the
invoice amounts was communicated to FTI.
The Motion to Disqualify Wohl Is Denied
The Court has already decided substantially the same issues as those
raised by FTI's motion here, in the related case, Lankier,
287 F. Supp.2d at 408.
Rossi claims that Wohl committed to providing representation for Rossi
and BCM regarding the FTI invoices in the dealings BCM had with its
insurance company, American International Specialty Lines Insurance
Company ("AISLIC"), which was indemnifying BCM for the costs of Rossi's
(but not Phillips') defense. Rossi claims that Wohl's agreement included
agreeing to review with FTI their billing, agreeing to negotiate on
Rossi's and BCM's behalf and obtaining confidential information about the
invoices. Rossi claims that the subsequent representation of FTI
therefore constitutes a conflict of interest on the part of Wohl.
In determining whether an attorney can oppose his former client, courts
evaluate whether the new matter is substantially related to the subject
matter of the prior representation. The substantial relationship test
involves three considerations: 1) whether the moving party is a former
client of the adverse party's counsel, 2) whether a substantial
relationship between the subject matter of the prior representation and
subsequent representation exists, and 3) whether counsel had access or
likely access to
relevant privileged information. Evans v. Artek Systems
Corp., 715 F.2d 788, 791 (2d Cir. 1983).
As already held in Lankier, 287 F. Supp.2d at 405, the prior
criminal representation of Rossi is not substantially related to the fee
collection litigation. When "the only connection between this case and
the plaintiff's prior representation is the matter of the allegedly
unpaid fees," id. (quoting Cooney & Bainer, P.C. v.
Milum, No. CV94-024 65 58, 1995 WL 373951, at *4 (Conn. Super. June
19, 1995)), a substantial relationship has not been demonstrated.
It was also held previously that Rossi and BCM failed to show that
either Wohl or LSW represented BCM in its dispute with the insurance
company over billing. Lankier, 287 F. Supp.2d at 405-06.
("Even if Wohl had intervened on BCM's behalf and contacted the insurance
company in some manner, such conduct would be insufficient to create an
attorney-client relation between Wohl and BCM in light of BCM's signed
acknowledgment that LSW would `not be acting as attorneys for BCM . . .
or any other related party in any respect.'")
The claim that Wohl obtained confidential information which would
disqualify Wohl is without merit. In order to disqualify an attorney for
possessing confidential information, "the moving party must demonstrate
that `the attorney was in a
position where he could have received information which his former
client might reasonably have assumed the attorney would withhold from his
present client.'" C.A.M. v. E.B. Marks Music, Inc.,
558 F. Supp. 57, 59 (S.D.N.Y. 1983) (quoting Allegaert v. Perot,
565 F.2d 246, 250 (2d Cir. 1977). Rossi himself states that the agreement
with Wohl was to work with FTI to either satisfy AISLIC's issues with the
billing or negotiate an adjustment. Rossi Aff. at 3. Wohl's letters to
Rossi state that he "was relaying th[e] position [that Rossi was waiting
for the insurance company to make payments] to the various professionals
who have been inquiring about their outstanding bills." Wohl Aff. Ex. 11.
The issues Rossi and BCM were having with their insurance company were
not a secret to be kept from the experts but were being disseminated to
the experts with the full knowledge of Rossi.
Accordingly, defendants' motion to disqualify Wohl is denied.
Plaintiffs Have Established an Account Stated
Rule 56(e) of the Federal Rules of Civil Procedure provides that a
court shall grant a motion for summary judgment "if the pleadings,
depositions, answers to interrogatories, and admissions on file, together
with affidavits . . . show that there is no genuine issue as to
material fact and that the moving party is entitled to a judgment as a
matter of law." Fed.R.Civ.P.
56(e); Celotex Corp. v. Catrett, 477 U.S. 317 (1986);
Silver v. City Univ., 947 F.2d 1021, 1022 (2d Cir. 1991). "The
party seeking summary judgment bears the burden of establishing that no
genuine issue of material fact exists and that the undisputed facts
establish her right to judgment as a matter of law." Rodriguez v.
City of New York, 72 F.3d 1051, 1060-61 (2d Cir. 1995). "In
determining whether a genuine issue of material fact exists, a court must
resolve all ambiguities and draw all reasonable inferences against the
moving party." Matsushita Elec. Indus. Co. V. Zenith Radio
Corp., 475 U.S. 574, 587 (1986); Gibbs-Alfano v. Burton,
281 F.3d 12, 18 (2d Cir. 2002).
Plaintiffs argue for partial summary judgment on the basis of an
Under federal and New York law, an account stated
refers to a promise by a debtor to pay a stated
sum of money which the parties had agreed upon as
the amount due. Ally & Gargano, Inc. v.
Comprehensive Accounting Corp., 615 F. Supp. 426,
429 (S.D.N.Y. 1985) (quoting Luckenbach
S.S. Co. v. United States, 189 F. Supp. 309,
311 (S.D.N.Y. 1960)). It is incumbent upon the
party in receipt of an account "to examine the
statement and make all necessary objections"
because "an agreement to pay an indebtedness may
be implied if a party receiving a statement of
account keeps it without objecting to it within a
reasonable amount of time unless fraud, mistake or
other equitable considerations are shown."
Kramer Levin Nessen, Kamin & Frankel v.
Aronoff, 638 F. Supp. 714, 719 (S.D.N.Y.
1986) (citing Rosenman Colin Freund Lewis
& Cohen v. Neuman, 93 A.D.2d 745,
461 N.Y.S.2d 297, 298-99 (1st Dep't. 1983). "An
agreement to pay an indebtedness may also be
implied if the debtor makes partial payment. The
partial payment is considered acknowledgment of
the validity of the account." Kramer
Levin, 638 F. Supp. at 720 (citing
Parker, Chapin Flattau & Klimpl v.
Corp., 59 A.D.2d 375, 378, 399 N.Y.S.2d 222,
224 (1st Dep't 1977)).
Lankier, 287 F. Supp.2d at 408 (quoting Hackensack
Cars, Inc. v. Lifestyle Limousine Service Corp., 87 Civ. 2764, 1990
WL 74885, at *4 (S.D.N.Y. May 25, 1990)).
Rossi and BCM first contend that according to a contract with FTI,
Phillips and not Rossi or BCM had agreed to be responsible for the debt.
They further contend that questions regarding the reasonableness of the
accounts were communicated prior to the institution of this litigation.
Finally, Rossi and BCM argue that summary judgment is unwarranted because
they have been unable to conduct discovery.
Rossi's and BCM's first argument is that pursuant to a contract between
FTI and Phillips, FTI would bill Phillips and Phillips agreed to "be
solely responsible for payment of [FTI's] fees and expenses." FTI
Retainer Agreement, dated June 29, 2001 (attached as Exhibit A to
Complaint). While this accounts for why FTI's Count I for a breach of
contract names only defendant Phillips, the contract is not relevant to
the account stated claim against Rossi. What is required for an account
stated is the receipt of a bill which is not objected to by the party
receiving the bill. See Kramer Levin, 638 F. Supp. at 719. Rossi received
numerous invoices addressed to him which stated FTI's charges and to
which he did not object.
Rossi and BCM contend that questions regarding the reasonableness of
the accounts were communicated prior to the institution of this
litigation, particularly that Wohl was aware of the dispute between BCM
and its insurer, AISLIC, at least since the fall of 2001. AISLIC believed
certain of those charges were not reasonable and therefore would not
reimburse BCM for them under BCM's policy of insurance. Rossi and BCM
also contend that Wohl was aware of concerns regarding billings raised by
Rossi and Phillips independent of the AISLIC dispute.
For the doctrine that an objection to an account would negate a claim
of an account stated to have any meaning, the term "objection" must refer
to 1) an objection of the debtor; 2) communicated to the entity owed.
This principle does not refer to a dispute between the debtor and third
parties. Silver Hill Hospital, Inc. v. Rizzo., No. 97 Civ.
8207, 1999 WL 447446, at *2, *7 (S.D.N.Y. June 30, 1999). Therefore any
dispute between BCM and its insurer, AISLIC, is immaterial. The parties
raise facts analogous to the prior account stated claim brought against
Rossi in which the Court stated:
At most, the evidence put forward by the
Defendants related to this dispute establishes
that AISLIC objected to the fees, and not Rossi or
BCM. Even objections by BCM would be insufficient
to defeat summary judgment, as the retainer
addressed to Rossi and signed by both Rossi and
BCM acknowledges that if BCM becomes `unwilling or
unable to pay our bills, you understand that you
will be obligated to pay them.'
Lankier, 287 F. Supp.2d at 408 (quoting Wohl Reply Aff.
Exh. 1). Rossi's obligation was not conditioned on, or qualified by,
defendant BCM's insurance coverage.
Likewise, any knowledge of the dispute between BCM and AISLIC by Wohl
is irrelevant. Even if Wohl knew of an objection by Rossi, this would not
defeat summary judgment as the objection must be communicated to FTI.
Silver Hill Hospital, 1999 WL 447446, at *2, *7 (finding an
account stated where defendant did not communicate an objection to the
hospital which had provided him services, despite defendant's
disagreements with his insurer over whether the services were covered).
Further, Rossi's objection must be specific and relate to the
correctness of the account instead of bringing a vague "concern" to the
attention of Wohl. Silver Hill Hospital, 1999 WL 447446, at *5;
Darby & Darby, P.C. v. VSI Int'l Inc., 95 N.Y.2d 308, 315,
716 N.Y.S.2d 378, 739 N.E.2d 744 (2000) (defendant's "self-serving, bald
allegations of oral protests were insufficient to raise a triable issue
of fact as to the existence of an account stated."); Seward &
Kissel v. Smith Wilson Co., Inc., 814 F. Supp. 370, 372 (S.D.N.Y.
1993) (summary judgment granted where defendant voiced no objection in
previous correspondence and claimed it had raised oral objections
earlier); In re Rockefeller Center Properties, No. 00 Civ. 647,
2002 WL 22051, at *5 (S.D.N.Y. Jan. 8, 2002) ("protestations lacked
substance . . . although [defendant's lease
checks] were marked `paid under protest,' [where defendant] never
specified the nature of its protest."); Greenspan & Greenspan v.
Wenger, 294 A.D.2d 539, 742 N.Y.S.2d 875 (2d Dep't. 2002);
Lankier, 287 F. Supp.2d at 408 ("The alleged objections . . .
are conclusory and unsubstantiated, and do not provide any detail as to
the nature of the objections.")
Finally, Rossi's and BCM's claimed objections occurred only "on the eve
of trial," which started in November 2001. Opp. Mem. at 7. BCM has paid
for all of FTI's invoices for charges that were incurred prior to the
start of the criminal trial. Each bill on which FTI seeks recovery was
submitted to Rossi and BCM during or after the trial. Rossi's and BCM's
alleged objections to earlier statements are "not enough to avoid
liability [to a later, final statement of account] under an account
stated theory." Ally & Gargano, Inc., 615 F. Supp. at 426.
Rossi and BCM argue that discovery is needed to uncover documentation
of FTI's knowledge of the dispute with AISLIC regarding the
reasonableness of the billings, and to determine presently the
reasonableness and appropriateness of the invoices submitted. Rossi and
BCM further argue that genuine issues of material fact remain as to BCM's
actual receipt of the invoices.
As stated above, any dispute with AISLIC regarding the billings is
immaterial. The reasonableness of the billings at this
point is also immaterial as the doctrine of account stated is that
"an agreement to pay [the amount stated] may be implied if a party
receiving a statement of account keeps it without objecting." Kramer
Levin, 638 F. Supp. at 719.
As held in the prior case against Rossi, "Further discovery would not
assist the determination of this motion, as Defendants themselves are
best situated to provide documentation of any earlier objections, and
have not done so." Lankier, 287 F. Supp.2d at 409. Finally, FTI
has submitted sworn affidavits attesting to the dates that particular
invoices were sent out, and has also provided copies of each invoice.
Each invoice sent out by LSW, which also included invoices from FTI,
includes a cover letter which indicates that the invoice was sent via
Federal Express. According to the Second Circuit,
New York law holds that when, as here, there is
proof of the office procedure followed in a
regular course of business, and these procedures
establish that the required notice has been
properly addressed and mailed, a presumption
arises that notice was received. The mere denial
of receipt does not rebut that presumption. There
must be in addition to denial of receipt
some proof that the regular office
procedure was not followed or was carelessly
executed so the presumption that notice was mailed
Meckel v. Continental Resources Co., 758 F.2d 811
(2d Cir. 1985). Defendants have made no objection to the non-receipt of
the invoices before this litigation commenced. The defendant's denial
of receipt is therefore insufficient to defeat summary judgment as
to the charges on those invoices.
For the foregoing reasons, the Rossi's and BCM's motion to disqualify
Wohl is denied, and FTI's motion for partial summary judgment is granted.
It is so ordered.
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