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United States District Court, S.D. New York

February 25, 2004.


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.

Prior Proceedings

  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) ("Lankier"). Page 3

  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. Page 4

 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 Page 5 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 Page 6 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. Page 7 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 account stated.

  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. Daelen Page 8 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. Page 9

  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.' Page 10

 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 Page 11 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 Page 12 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 becomes unreasonable.
Meckel v. Continental Resources Co., 758 F.2d 811, 817 (2d Cir. 1985). Defendants have made no objection to the non-receipt of the invoices before this litigation commenced. The defendant's denial Page 13 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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