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United States District Court, S.D. New York

November 15, 2004.

GOLDENBERG ROSENTHAL, LLP, et al., Defendants.

The opinion of the court was delivered by: RICHARD HOLWELL, District Judge


This litigation is the result of a business relationship that started out well but ended badly. The relationship between Shared Communications Services, Inc. ("SCS"), a telecommunications firm, and its accountant, Goldenberg Rosenthall, LLP ("GR"), began in 1995. Although SCS had once been satisfied with the services GR provided, by September 2001, that satisfaction had eroded and SCS refused to pay outstanding GR invoices. Following unsuccessful and ultimately acrimonious settlement negotiations, SCS filed suit on September 28, 2001, asserting six claims against GR: conversion, replevin, professional negligence or malpractice, billing fraud, breach of contract, and breach of fiduciary duty.*fn1 The conversion claim is asserted also against David Gruber, a partner at GR. GR, for its part, asserts counterclaims to recover for the invoices that SCS refused to pay.*fn2 A bench trial was held from December 1 to December 4, 2003. This opinion contains the Court's findings of fact and conclusions of law, as well as a summary of the prior proceedings in this action.

Prior Proceedings

  This action was originally filed on September 28, 2001, in New York state court. On November 2, 2001, defendants removed the action to the United States District Court for the Southern District of New York. Upon removal, the action was assigned to the Honorable John S. Martin, United States District Judge for the Southern District of New York. On July 23, 2003, the action was reassigned to the Honorable Shira A. Scheindlin, United States District Judge for the Southern District of New York. On November 12, 2003, the action was transferred to this Court. At the time of transfer to this Court, the case was ready for trial, with the parties already having submitted a joint pretrial order and Judge Scheindlin having substantially decided the motions in limine.

  The Court held a bench trial from December 1 to December 4, 2003. The Court heard testimony from GR partners, former partners, and associates, including Jerry Kalick, Jerome Kotzen, David Gruber, Brad Johnson, and Thomas Earley. The Court also heard testimony from Paula Brown, founder and chief executive officer of SCS, as well as from plaintiff's expert witness Martin Davidoff and defendants' expert witness David Scherf. After trial, the parties submitted designations and counter-designations from the deposition transcript of Lloyd Persun, a lawyer SCS hired to help resolve its tax liability. Finally, in early February 2004, plaintiff and defendants filed post-trial memorandums. Findings of Fact

  SCS, a Delaware corporation founded by Brown in 1983, sought to offer commercial building tenants a wide range of telecommunications services by entering into contracts with owners of buildings, thus allowing tenants to have access to state-of-the-art equipment and services for a single monthly charge without capital outlays. In pursuit of that goal, SCS took over a number of contracts (mostly in the Philadelphia area) and established five subsidiary operating companies, one for each location covered by the contracts: SCS of 1800-80 JFK Blvd., Inc. ("SCS of 1800"); SCS of ESR, Inc.("SCS of ESR"); SCS of Walnut Hill Plaza, Inc. ("SCS of Walnut Hill"); SCS of Devon Square, Inc. ("SCS of Devon"); and SCS of New York, Inc. ("SCS of NY"). (Tr. at 506-07, 577.) SCS owned all of the stock of each subsidiary and invoices for accounting services rendered to the subsidiaries would be sent by accounting firms to SCS, who would pay those invoices on behalf of the subsidiaries. (Tr. at 577-78.)

  From 1990 until March 1995, SCS became embroiled in debilitating litigation that depleted its operating resources and caused it to neglect its financial affairs and record keeping. Compounding these financial difficulties, SCS found the services of its accounting firm at the time, Ernst & Young LLP, to be wanting. SCS decided that the large-firm culture of Ernst & Young LLP was not well suited to a small company like SCS, which had only three or four employees (none of whom was a bookkeeper or accountant) and did not have a general ledger or other formal set of books. (Tr. at 511-12, 606-08.) Thus, once the litigation was concluded, SCS decided to retain a different accounting firm to get its financial house in order after years of neglect. (Tr. at 510.) On the recommendation of a local Philadelphia attorney, Brown met with Kotzen, a partner at GR, on March 16, 1995. (Tr. at 514.) Brown explained SCS's situation to Kotzen, expressing concern that SCS may be facing penalties and interest from the years of neglect. (Tr. at 514-15.) Kotzen assuaged Brown's concerns and Brown, on behalf of SCS and its subsidiaries, agreed to retain GR. (Ex. 81; Tr. at 514-15, 518.)

  Although the relationship between SCS and GR began as a limited one — at first, GR was only to prepare a report, financial statements, and income tax returns for 1994, not to audit the financial records and statements, Ex. 81 — the relationship soon blossomed into an expansive one, with GR serving almost all of SCS's accounting needs. (Ex. 95.) Indeed, SCS was sufficiently content with GR's services to continue giving work to Kotzen, who in turn directed a team of GR accountants, even after Kotzen retired from GR in 1998. (Tr. at 198.)

  Brown and Kotzen had discussed the cost of GR's services during their initial meeting, Tr. at 515-18, but no rate structure was ever formally agreed upon. Throughout their relationship, Kotzen never explained to Brown how the invoices were calculated, Tr. at 120, and SCS and GR never signed any kind of formal contract or retainer agreement, including any contract or agreement that governed the exact rates charged for GR's services. (Ex. 81.) Nevertheless, SCS received invoices on a regular basis from GR for services rendered to SCS and its subsidiaries, which invoices set forth the names of the accountants who worked on the SCS account, the hours the accountants worked, the rates they charged, and a general description of the tax matter on which they worked. (Ex. 92, KKK.) SCS paid all invoices issued prior to April 2000.*fn3 (Ex. 94, KKK.)

  Despite the dutiful payment by SCS, GR did not perform its accounting tasks without some mistakes. In particular, there were four areas in which GR committed errors. The first area concerns Pennsylvania's Public Utility Realty Tax ("PURTA"), which is an assessment on realty owned by public utility companies. (See Dep. of Lloyd Persun, October 1, 2003, at 210-211 (hereinafter "Oct. Dep.").) SCS, through its accounting firm, would typically file an annual corporate report indicating that no tax was owed because SCS owned no realty. In 1995, after GR had been retained, SCS of 1800 received a notice from the Pennsylvania Department of Revenue ("the State") stating that no annual corporate report had been filed. (Ex. 30.) This notice was forwarded to GR. In February 1996, SCS of 1800 received another notice from the State, this one explicitly stating that an additional $11.45 of PURTA tax for 1994 must be paid within 45 days. (Ex. 32.) The striking information in that notice was not the amount due, but rather that any tax was due at all. That notice was forwarded to GR, as well. (See id.) In response to the February 1996 notice, Earley, a GR accountant working under Kotzen's leadership, wrote a letter, dated February 21, 1996, informing the State that SCS of 1800 "does not own any realty of any kind and never has." (Ex. 33.) The letter explained that SCS of 1800 had filed its PURTA tax returns as part of a larger filing pursuant to an amnesty program meant to cover the years that SCS was tied up in litigation and that the returns showed SCS of 1800 not liable for any PURTA taxes.*fn4 (See id.)

  The problem with Earley's letter response was that it did not comport fully with either of the two proscribed ways to contest PURTA liability. To properly contest liability, a complainant could either pay the tax and apply for a refund or file a petition for reassessment. (See Oct. Dep. at 213.) It is possible that the State would treat a letter such as Earley's as a petition for reassessment, but it was also possible that such a letter, since it was not formally a petition for reassessment, would not be treated as a petition for reassessment. (See id.)*fn5

  Apparently, the State did not treat Earley's letter as a petition for reassessment because, in May 1996, SCS of 1800 received another notice, stating:

"In February you received a notice assessing your pro-rata share of Additional 1994 PURTA tax due. Our records indicate that you did not respond or remit payment of the tax within the 45 days prescribed by law." (Ex. 34.)
Approximately one month later, in response to the May notice, Early again wrote a letter, similar to the first, informing the Pennsylvania Department of Revenue that SCS of 1800 "has never owned any real estate and has never been liable for this tax." (Ex. 35.) This time, however, Earley's letter garnered a letter in response from the State. The State explained that SCS of 1800, SCS of ESR, SCS of Walnut Hill, and SCS of Devon did not file PURTA reports for 1994 and therefore the companies were liable for PURTA taxes. (Ex. 36.) The letter further explained that, in order to contest the liability, "each company must [first] satisfy these assessments to avoid further enforcement action," then the companies could appeal the assessments. (Id.)

  Fortunately, this issue dissipated after GR provided the State with copies of the PURTA tax returns that were filed as part of a larger filing pursuant to an amnesty program. (Ex. 37.) Neither SCS nor any of its subsidiaries have ever paid the assessed 1994 PURTA tax and no PURTA liability was assessed against SCS or its subsidiaries after 1994.

  The second area where GR erred pertains to the filing of sales tax returns. As noted earlier, SCS and its subsidiaries had neglected their filing responsibilities during the litigation and in fact had failed to file sales tax returns from October 1991 through July 1995. GR filed those returns for SCS of 1800 in September 1995. (Ex. 2.) However, GR miscalculated the monthly returns and had to file amended returns as part of an amnesty program the State offered between October 13, 1995, and January 10, 1996. (Ex. 6.)

  This sales tax issue was further complicated by an audit of SCS of 1800 that the State conducted in 1995 and GR's response to the results of the audit. The State's audit concluded that SCS of 1800, with the filing of the returns, had satisfied its sales tax obligations, but levied a penalty of $47,447.50 for the late filing of the state sales tax and $7908.00 for the late filing of the local sales tax. (Ex. 13.) Those figures amounted to 50 percent of the total sales tax SCS of 1800 owed — unusually large penalties, Tr. at 257-58 — and reflected the auditor's frustration in dealing with SCS of 1800, which repeatedly cancelled appointments with the auditor, before GR was retained. (Ex. H.)*fn6 However, GR bumbled the appeal of those penalties.

  Earley filed a timely petition for appeal on October 25, 1996, but specified only the state tax penalty on the petition. (Ex. 13.) Although the local penalty was noted in the documents attached to the petition, the Board of Appeals was not obligated to review that penalty because it was not specified in the petition. The other flaw in the petition was that the amnesty program was the only ground raised for challenging the penalties. (See id.) Early wrote that the sales tax returns were filed pursuant to the amnesty program and that "[a]ll penalties were to be abated under this program." (Id.) However, the Notice of Tax Amnesty Program clearly stated that only taxes due before December 31, 1993, would be eligible for abatement. (Ex. 3.) Earley did not argue that the penalty should be abated because SCS of 1800 did not deliberately fail to file the returns. Such an argument had been successful in getting abated other penalties levied against SCS. (Ex. 8.)*fn7

  On March 26, 1997, the Board of Appeals issued a decision abating the state tax penalty through November 1993 in accordance with the amnesty program, but sustaining the remainder of the penalty. (Ex. 15.) The decision did not abate any of the local tax penalty. (See id.) Brown did not learn that the penalties were not fully abated until the time to appeal the Board of Appeals decision had expired.*fn8 (Tr. at 579.) In fact, Brown believed the penalties had been abated in their entirety, as she was told by Earley, see id., and thus never paid them. Brown finally learned of the unpaid penalties in 2000 when she had decided to sell a substantial portion of SCS of 1800's assets and a routine lien search was performed in connection with the asset sale. (Ex. 20.) The lien search revealed the unpaid penalties, Ex. 22, and Brown brought them to the attention of Kotzen. (Tr. at 534-35.)

  On November 17, 2000, Early wrote a letter to the Pennsylvania Office of the Attorney General. (Ex. 27.) In the letter, Early again stated his belief that the amnesty program should have abated all the penalties. (See id.) The letter also stated, for the first time, that the penalties should be abated because SCS of 1800's failure was accidental and the result of extenuating circumstances. (See id.) However, the Attorney General declined to grant relief to SCS of 1800.

  On March 13, 2002, Lloyd Persun, an attorney hired by SCS, wrote another letter to the Office of the Attorney General in a further effort to abate the penalties. (Ex. 29.) Ultimately, by July 2002, Persun was able to persuade the Attorney General to deem the penalties "uncollectible" and, although the State liens remained unsatisfied, to close the file on SCS of 1800, which had by then ceased operations.*fn9 (Ex. R.) Thus, the penalties have never been paid, though SCS did pay Persun approximately $6,000 for his work on this matter. (See Dep. of Lloyd Persun, September 16, 2003, at 177-78 (hereinafter "Sept. Dep.").) In addition, SCS was compelled to pay a second law firm, Montgomery McKracken, $13,311.58 to remove certain non-State liens asserted against SCS and its subsidiaries that were triggered by the outstanding sales tax penalties. (Tr. at 589-91; Ex. 142.) SCS paid a third law firm, Trujillo Rodriguez, $447.25 to remove a non-State lien that had been asserted against Brown individually based on the unpaid sales tax penalties. (Tr. at 592; Ex. 69.)*fn10 Finally, SCS paid a fourth law firm, Fischbein Badillo, $4,689.39, to act as SCS's general counsel and coordinate the work of the other law firms. (Tr. at 588-89; Ex. 71.)

  GR also committed errors in a third area, which involved the 1996 Business Privilege Tax. On March 18, 1996, GR forwarded to SCS of 1800 a Business Privilege Tax Extension Coupon for 1996 and directed SCS of 1800 to pay the State $2,500. (Ex. 41.) However, having filed for an extension, GR then never filed the return for the 1996 Business Privilege Tax. (Tr. at 453.) SCS of 1800 learned of the missing return on October 20, 1998, when it received a Code Enforcement Complaint from the Commonwealth of Pennsylvania. (Ex. 42.) SCS of 1800 forwarded this Complaint to GR and GR quickly prepared the appropriate tax return. (See id.; Tr. 453-54.) In its haste, GR forgot that SCS of 1800 had already paid $2,500 towards the 1996 tax. (Tr. at 454.) Fortunately, SCS of 1800 picked up on that omission in the first draft of the return and GR prepared a corrected return reflecting the fact that $2,500 had already been paid. (Tr. at 454; Ex. 43.) When the corrected return was filed, SCS retained a Philadelphia law firm (Ballard Spahr) to handle the proceedings with the Complaint and to clear the liens that stemmed from the missing tax return. For this work, SCS paid Ballard Spahr $1,983.30. (Tr. at 592-93; Ex. 70.)*fn11 Though the law firm was successful in resolving those issues, SCS of 1800 eventually was obligated to pay another $1,291 to the State because the previously filed corrected return was based on estimated figures, the exact figures not being available to GR at the time.*fn12 (Tr. at 476-78; Ex. 44.)

  The fourth area where GR faltered was in its handling of the gross receipts taxes from 1986 to 1996. The Pennsylvania Public Utilities Commission levies a tax on the gross receipts of all utilities providing telephone and telecommunications services in Pennsylvania. SCS believed that, since it was not a utility company, it was not subject to this tax. (See Sept. Dep. at 17-21.) Accordingly, GR submitted gross tax receipt returns for 1986 through 1996 indicating that this tax was "N/A", not applicable, to SCS and its subsidiaries. (Ex. 45; Tr. at 482.)*fn13

  The State responded to the tax returns, in a letter dated March 12, 1998, by asking for more information to determine whether the tax in fact applied to SCS and its subsidiaries. (Ex. 46.) However, shortly after that letter, the State issued a couple favorable "settlements" to SCS of 1800, finding that SCS of 1800 was not subject to the tax for certain periods between 1986 and 1996. (Ex. 47.) Based on these initial favorable settlements, GR recommended to SCS that it "sit tight . . . rather than send additional information." (Ex. 48.) Unfortunately, although the first few settlements were favorable, the subsequent settlements were not favorable and held SCS and its subsidiaries liable for the tax. (Ex. 55.) On January 13, 1999, Earley conceded that all of GR's attempts "to get Pennsylvania to accept the returns as filed have been unsuccessful" and recommended "that at this point we should provide [the State] with a detailed explanation of why we are not subject to the gross receipts tax." (Ex. 49.) Earley also recommended that SCS contact an attorney to draft a letter to the State "setting forth the reasons we are exempt." (Id.) Yet, by January 13, 1999, the time to appeal the unfavorable settlements had expired. (Tr. at 440; Ex. 55.) Thus, even though Persun, SCS's tax attorney, drafted a letter and a memorandum outlining SCS's position on appeal, Ex. 51, 52, the State rejected the petitions for appeal as untimely. (Ex. 55, 60, 61.)

  In addition to being untimely, there were two other problems with the petitions. First, Earley sent the petitions to the wrong administrative agency. Fortunately, this mistake proved harmless because the Board of Appeals, which received the petitions but did not have authority to act on them, graciously forwarded the petitions to the proper agency, the Board of Finance and Revenue. (Ex. 54.) Second, Earley failed to present a separate petition for each year from 1986 to 1996 for each SCS company and instead filed one petition for each SCS company covering all the years. (Ex. 56.) This mistake was not harmless, as the Board of Finance and Revenue notified Earley that the petitions, in that form, could not be processed. (See id.) Eventually, Persun took charge of the effort to resolve the problems with the gross receipts tax. (Tr. at 449-50.) Persun was able to convince the Board of Finance and Revenue to "resettle" the assessments and to reach the merits of the dispute, thereby allowing the Board of Finance and Revenue to determine that SCS and its subsidiaries in fact were not public utilities and to eliminate their liability, which by then totaled over $1 million with penalties. (Ex. 67.) However, SCS expended approximately $23,000 on Persun's services in unraveling this matter. (See Sept. Dep. at 84-85, Ex. 68.)

  There is a fifth area where GR might have erred: the 1998 Delaware Franchise Tax. All the SCS companies are Delaware corporations and must file Delaware Franchise Tax returns every year. The tax may be calculated in one of two ways: either based on the number of shares outstanding or under an alternative method that takes the value of the corporation into account. (Tr. at 568.) GR prepared and filed the 1998 Delaware Franchise Tax returns, which under the alternative method amounted to $50 per corporation, for all the SCS subsidiaries. (Ex. 40.) However, no return was filed for the parent corporation, SCS, thereby causing SCS to incur a tax liability of $50,160 based on the number of shares outstanding. (Ex. 39.)*fn14 It is unclear whether this liability arose because GR simply forgot to file this return, as plaintiff claims, Tr. 570-71, or whether Earley could not prepare the return because SCS's final balance sheets were not yet available and thus Brown — not GR — was supposed to file an estimated return.*fn15 (Ex. V.)*fn16 However, it is clear that this obligation has not been paid, see Pl. Mem. at 68; Defs.' Post Trial Mem. at 30 (hereinafter "Defs.' Mem."), and there is no evidence that it will ever be paid.

  From time to time throughout their business relationship, and as these errors occurred, SCS would ask GR for invoices that provided more specific information on the services for which SCS was being billed. (Ex. 93, 95, 96; Tr. at 91, 300, 545.) Although more detailed data existed, Tr. at 50, 301-02, 362, 397-98, 546-47; Ex. 72, 98-100, GR never provided such information to SCS during their business relationship. (Tr. at 91-92, 300, 308, 546-47.)

  In fact, GR maintained sloppy billing records. Although GR's policy dictated that accountants log their time on an accurate and contemporaneous basis in units of one-tenth of an hour, Ex. 106, Brad Johnson's billing records show that the time he spent working on SCS's account almost always culminated in full-hour or half-hour blocks. (Ex. 99, 131; Tr. at 369.) Johnson explained that he didn't actually record the time he worked, but rather tried to estimate that time, sometimes rounding up and sometimes rounding down to a half-hour block. (Tr. at 369-71.) When an accountant did not log their time contemporaneously, as happened with Kotzen's work on SCS, GR later — seven months later in Kotzen's case — "reconstructed" the hours billed to a client. (Tr. at 311.) By early 2001, the relationship between SCS and GR had significantly deteriorated, with SCS refusing to pay GR for services invoiced in 2000. (Tr. at 524-26, 530-31, 537.) As of September 2001, SCS owed GR $46,665.81 according to GR's invoices, including approximately $3,000 in finance charges. (Ex. KKK.) On September 7, 2001, SCS, represented by Brown and Donald David, an attorney with Fischbein Badillo, met in New York with GR, represented by Kozen and David Gruber, a partner at GR. (Tr. at 524, 538-39.) The parties agreed in principle on terms of a settlement whereby GR would perform some additional services for SCS, such as preparing and filing SCS's 2000 tax returns, and SCS would pay GR between $20,000 and $30,000 in final settlement of the outstanding invoices and the additional work to be performed. (Tr. at 538-43.) At the conclusion of the meeting, SCS provided GR a $20,000 check to be held in escrow, as a good faith gesture, pending execution of a written settlement agreement. (Tr. at 540-43; Ex. 74.) Gruber and Kotzen agreed that the check would not be deposited, and in fact would be returned, if no final settlement agreement were reached. (See id.) Indeed, the check had a note on the front that read "Final Settlement as Per Letter Agreement". (Ex. 74.)

  On September 10, 2001, in anticipation of GR's work on SCS's 2000 tax returns, Brown made copies of numerous SCS documents and faxed them to GR. (Tr. at 543.) Brown also emailed GR numerous electronic documents and files. (See id.)

  That same day, Gruber sent David a letter with an attached draft settlement agreement. (Tr. at 543-44; Ex. DDD.) The letter stated, "[u]ntil such time as the agreement is signed, we will not begin our professional services as contemplated in the attached letter [agreement] nor will I deposit the $20,000 check I am holding as partial payment on the account." (Ex. DDD.) When Brown reviewed the draft letter agreement, she found that it did not accurately reflect the agreement that had been reached on September 7, 2001. (Tr. at 543.) Significantly, the draft called for additional payment for work on the 2000 tax returns. (See id.) Brown instructed David to prepare a revised draft and to send that revised draft to GR, which David did on September 11, 2001. (See id.; Ex. EEE.)

  On September 14, 2001, Brown discovered from reviewing SCS's online bank statement that GR had deposited the $20,000 check even though no final agreement had been signed. (Tr. at 549-50.) In depositing the check, someone at GR heavily crossed out "Final" from the note on the check that originally read "Final Settlement as Per Letter Agreement". (Ex. 74; Tr. at 541.) When Brown discovered that the check had been deposited, she directed David to demand that GR return the $20,000, as well as SCS's documents. (Tr. at 550-51.) GR did not comply with either of those demands, and instead applied the $20,000 to the $46,665.81 outstanding from GR's invoices for SCS. (See id.; Ex. KKK.) This litigation was initiated shortly thereafter. (Tr. at 550-51.)

  Meanwhile, in order to file the 2000 tax returns for SCS and its subsidiaries, Brown was forced to recompile the documents that she had recently faxed and emailed to GR, as well as to recreate the documents GR had used for filing the 1999 tax returns. (Tr. at 585-86.) This proved an arduous task for Brown and her assistant because SCS did not maintain accessible and organized copies of those documents. (Tr. at 586-87.) Brown spent 225 hours on this task. (Tr. at 587.) Brown's assistant spent 40 hours on this task, for which SCS paid her $15 per hour ($600 total). (See id.) In addition, SCS paid its new accountants $29,000 to sift through the disarrayed documents and to file the 2000 tax returns. (Tr. at 588, 623-24.)

  Conclusions of Law

  I. Jurisdiction, Venue, and Choice of Law

  The Court has jurisdiction over this dispute pursuant to 28 U.S.C. § 1332, the diversity statute, and venue is proper because plaintiff's principal place of business is in New York. The parties agree that Pennsylvania law governs all the claims except that determining the fate of the $20,000 check, which the parties agree is governed by New York law.*fn17 (See Pl. Mem. at 44-46; Defs. Mem. at 8-12.) The Court will address each of the claims and counterclaims in turn. However, the Court first considers the issue of standing, which is applicable to all of SCS's claims.

  II. Standing

  As noted above, SCS is a Delaware corporation formed in 1983. (See Cert. of Renewal, attached to Letter from David to Holwell, J., Feb. 4, 2004.) On March 1, 2002, after this lawsuit was initiated, SCS's charter was voided for non-payment of taxes. (See id.) On January 7, 2004 — shortly after trial, the charter was renewed. (See id.) Given the almost two-year period when SCS did not have a valid charter, there is a question as to whether SCS has standing to maintain this suit. Under Fed.R.Civ. P. 17(b), the capacity of a corporation to sue or be sued is determined by the law of the jurisdiction of incorporation. Since SCS was incorporated in Delaware, the Court looks to Delaware law for guidance on this issue. Under Delaware law, "[a]ll corporations, whether they expire by their own limitation or are otherwise dissolved, shall nevertheless be continued, for the term of 3 years from such expiration or dissolution . . . for the purpose of prosecuting and defending suits". Del. Code Ann. tit. 8, § 278 (2003). Specifically with respect to litigation "begun by or against the corporation either prior to or within 3 years after the date of its expiration or dissolution, the action shall not abate by reason of the dissolution of the corporation; the corporation shall, solely for the purpose of such action, suit or proceeding, be continued as a body corporate beyond the 3-year period and until any judgments, orders or decrees therein shall be fully executed". Id. Thus, based on Delaware law, the fact that SCS did not have a valid charter for part of the litigation does not effect its standing as plaintiff or counterclaim defendant. Cf. Regal Custom Clothiers, Ltd. v. Mohan's Custom Tailors, Inc., No. 96 Civ. 6320 (SS), 1997 WL 370595, at *2-3 (S.D.N.Y. Jul. 1, 1997) (holding plaintiff corporation had standing to sue under Illinois law, where plaintiff was incorporated). Indeed, the parties agree on this point. (See Pl. Mem. at 84-16; Defs. Mem. at 6-7.)

  However, defendants argue that plaintiff does not have standing to sue because "the majority of the claims [belong to] its subsidiaries — the real parties in interest" that have suffered the damages. (Defs. Mem. at 7.) This argument misses the mark. Where it is determined that a parent corporation has incurred actual damages from the breach of a contract to which the parent corporation had privity with the defendants or from a tort in which defendants owed a duty to the parent corporation, it is the parent corporation, not a subsidiary, that has suffered actual damages and thus can assert claims to recover on those damages. See Duke & Co. v. Anderson, 275 Pa. Super. 65, 71, 418 A.2d 613, 616 (Pa. Super. Ct. 1980) (noting that for professional negligence claim, defendant must breach duty owed to plaintiff). That is the case here. To the extent there was a contract, it was between GR and SCS, who paid the bills even when the services were rendered on behalf of the subsidiaries. Indeed, the invoices issued by GR were addressed to SCS, Ex. 92, and that is presumably why GR is counterclaiming against SCS as opposed to filing third party claims against the subsidiaries. To the extent GR had a duty to perform accounting services in a reasonable manner, that duty was owed to SCS. To the extent there were actual damages stemming from breach of contract or negligence, they fell upon SCS.*fn18 For these reasons, the Court finds that SCS has standing to bring both its contract and tort claims against GR.

  III. Plaintiff's First Cause of Action

  Plaintiff argues that Gruber and GR are liable for conversion of the $20,000 check given to Gruber on September 7, 2001. (See Pl. Mem. at 46.) Under New York law, "[t]he tort of conversion is established when one who owns and has a right to possession of personal property proves that the property is in the unauthorized possession of another who has acted to exclude the rights of the owner". Republic of Haiti v. Duvalier, 626 N.Y.S.2d 472, 475, 211 A.D.2d 379, 384 (N.Y.App. Div. 1995). As defendants correctly note, "[r]esolution of the conversion claim hinges on the events of September 7, 2001[, and] whether the writing contemplated by the parties was a condition precedent to the agreement". (Defs. Mem. at 13.) Defendants argue that "[u]nder the terms of the agreement reached, [GR] was entitled to the $20,000 without doing anything more" and thus had "obtained the right to possess the $20,000". (Id. at 13, 18.) In essence, defendants argue that "[t]here was no conversion because [GR] was entitled to the money." (Id. at 18.) However, whether GR was entitled to the money is a different issue from whether GR's possession was authorized. He who is owed is not necessarily authorized to take from the debtor by whatever means the creditor chooses simply because a debt exists. The facts reveal that GR was not authorized to possess the money. In addition to Brown's testimony, which the Court finds credible, as to what the parties agreed upon on September 7, 2001, Gruber sent a letter explicitly confirming that GR would not take possession of the money until a written agreement was finalized. (Ex. DDD.) The Court concludes that GR is liable to SCS for the conversion of $20,000 plus the legal rate of interest from September 14, 2001. See Wildermuth v. Becker, Civ. A. No. 87-5368, 1989 WL 46840, at *7 (E.D. Pa. Apr. 28, 1989); Kaiser v. Old Republic Ins. Co., 741 A.2d 748, 755, 1999 PA Super 271 (Pa.Super.Ct. 1999) (holding "pre-judgment interest may be awarded when a defendant holds money or property which belongs in good conscience to the plaintiff, and the objective of the court is to force disgorgement of his unjust enrichment").

  The Court also concludes that Gruber is jointly and severally liable for the conversion of $20,000. Defendants argue that Gruber should not be liable because he only "acted is his capacity as a partner of [GR] at all times and at all instances relevant to this lawsuit." (Defs. Mem. at 8.) Though that may be true of Gruber's actions, conversion is a tort, see e.g., Devlin v. Transp. Communications Int'l Union, 175 F.3d 121, 124 (2d Cir. 1999), and a partner or corporate officer who participates in a tort, regardless of whether it is in the course of his duties, may ordinarily be held individually responsible. See Commonwealth Toy & Novelty Co. v. Rock-A-Bye-Baby, Inc., No. 80 Civ. 0736 (CSH), 1982 WL 190667, at *2 (S.D.N.Y. Aug. 6, 1980). The Court sees no reason to depart from this rule.

  IV. Plaintiff's Second Cause of Action

  SCS argues that GR is liable for replevin in refusing to return SCS's documents. (See Pl. Mem. at 49-52.) "The action of replevin is founded upon the wrongful taking and detention of property and seeks to recover property in the possession of another." Valley Gypsum Co. v. Penn. State Police, 581 A.2d 707, 710, 135 Pa. Commw. 548, 553 (Pa.Commw. Ct. 1990). As such, "[r]eplevin is a possessory action in which the issues are plaintiff's title and right of possession." Id. To establish a claim for replevin, a plaintiff must prove two elements: (1) that plaintiff has title to the property as against the defendant in possession, and (2) that plaintiff is entitled to the immediate possession of that property. See Brandywine Lanes, Inc. v. Pittsburgh Nat'l Bank, 220 Pa. Super. 363, 369 n. 7, 284 A.2d 802, 806 n. 7 (Pa.Super.Ct. 1972). When return of the specific property cannot be obtained, the value of the property is recovered in lieu of the property. See Valley Gypsum, 581 A.2d at 710, 135 Pa. Commw. at 553. However, "[t]he primary relief sought is the return of the property itself, the damages being merely incidental." Id. Yet, Pennsylvania law does allow for the recovery of incidental damages, including expenses incurred from not being able to use the property, as part of an action for replevin in addition to return of the property. See Main Inv. Co. v. Gisolfi, 203 Pa.Super. 244, 248, 199 A.2d 535, 537-38 (Pa.Super.Ct. 1964).

  Defendants argue that GR is not liable for replevin because the documents GR possessed and refused to provide to SCS were work-product documents created by GR, albeit with data derived from SCS. (See Defs. Mem. at 19-21.) Plaintiff disputes that claim and argues that the documents GR possessed and refused to provide to SCS were those received from SCS, including original documents to which SCS has title. (See Pl. Mem. at 50-51.) The parties do not dispute that, through this litigation, SCS has now obtained all the documents that GR possessed concerning SCS. (TR. at 735; Pl. Mem. at 49; Defs. Mem. at 21.) A sample of those documents, which in total amount to over 7,000 pages, includes documents that clearly were not created by GR. (Ex. 129.) Thus, the Court finds that GR did possess at least some documents that were obtained from SCS and not created by GR. To the extent GR did not return those documents to SCS, GR is liable for replevin because SCS has title to those documents as against GR and because SCS was entitled to the immediate possession of those documents.

  However, since SCS has now recovered all the documents GR possessed, the real issue in this claim is whether SCS should be awarded damages for loss of use of the documents. SCS argues that, "[a]s a result of the Defendants' improper acts, SCS was forced to recreate the documents in question at a substantial expenditure of both time and dollars." (Pl. Mem. at 51.) SCS valuates this expenditure at $600 for the services of Brown's assistant, plus $29,000 for the services of SCS's new accountants, plus $56,250 for Brown's efforts.*fn19 (See id.) Therefore, SCS seeks incidental damages in the amount of $85,850.

  The problem with awarding plaintiff the full value represented by these incidental damages is that SCS would have had to make 2000 tax filings and pay accountants for those services under any circumstances. Plaintiff has not introduced any evidence as to how much, if any, of that $29,000 bill resulted from the accountants perusing disorganized documents or attempting to reconstruct financial information due to GR's failure to return SCS documents, as opposed to the normal work that accountants are required to do for any filing taking into account the normal disarray in which SCS maintained its documents. Since plaintiff has not introduced any evidence as to how much, if any, of the $29,000 paid to the new accountants was the result of GR withholding documents, the Court declines to award plaintiff any damages based on payment to the new accountants. See Lever v. Lagomarsino, 282 Pa. 110, 114-15, 127 A. 452, 454 (Pa. 1925) (no damages awarded in replevin action because court did not have sufficient evidence to determine damages). However, the Court awards SCS $56,850 based on the efforts of Brown and her assistant, which the Court considers fair value for loss of use of the documents until the time of their return to SCS.*fn20

  V. Plaintiff's Third Cause of Action

  SCS argues that GR is liable for professional negligence or malpractice. (See Pl. Mem. at 55-77.) To establish a claim for professional negligence, a plaintiff must prove that: (a) defendant had a duty to plaintiff; (b) defendant breached that duty by failing to exercise ordinary skill and knowledge; (c) defendant's negligence was the proximate cause of damage to plaintiff; and (d) plaintiff suffered actual loss. See Duke & Co. v. Anderson, 275 Pa. Super. 65, 71, 418 A.2d 613, 616 (Pa.Super.Ct. 1980). For a duty to exist in the context of a professional negligence claim, there must be privity between a plaintiff and defendant. See Hartford Accident & Indem. Co. v. Parente, Randolph, Orlando, Carey & Assocs., 642 F. Supp. 38, 40 (M.D. Pa. 1985). With respect to the second element (breach), "one who undertakes to render services in the practice of a profession or trade is required to exercise the skill and knowledge normally possessed by members of that profession or trade in good standing in similar communities." Robert Wooler Co. v. Fidelity Bank, 330 Pa. Super. 523, 531-32, 479 A.2d 1027, 1031 (Pa.Super.Ct. 1984) (quoting Restatement (Second) of Torts § 299A).

  In the present action, plaintiff has established that there is privity between SCS and GR. SCS contracted with GR to provide accounting services for SCS and its subsidiaries, and SCS paid GR for the accounting services. Thus, the Court concludes that GR owed a duty to SCS. The Court also concludes that GR breached this duty by failing to exercise the skill and knowledge normally possessed by other accounting firms in the community. In dealing with the PURTA tax, sales tax returns, Business Privilege Tax, and gross receipts taxes, GR missed deadlines to file returns, missed deadlines to appeal, incorrectly filed appeals, sent forms to the wrong agency, miscalculated returns, and misread the amnesty program rules. While the occurrence of a few mistakes would not necessarily equate to a failure to exercise the appropriate skill and knowledge, the number and type of mistakes attributed to GR indicate a level of skill and knowledge below that of other accounting firms in the community.

  In order to correct some of these mistakes by GR, SCS was compelled to expend money on attorneys. To correct mistakes associated with the sales tax returns, SCS spent a total of $24,448.22.*fn21 To correct mistakes associated with the Business Privilege Tax, SCS paid Ballard Spahr $1983.30. To correct mistakes associated with the gross receipts tax, SCS paid Lloyd Persun $23,000. In all, SCS spent $49,431.52 on legal fees on account of GR's errors.*fn22

  SCS argues that the approximately $55,000 in unabated sales tax penalties, as well as the $50,160 Delaware Franchise Tax obligation, should also be included in the calculation of damages. (See Pl. Mem. at 64-65, 67.) There are two reasons why this argument fails. First, the sales tax penalties were not caused by GR.*fn23 Although GR erred in appealing the penalties and is liable for money SCS expended to properly appeal the penalties after GR improperly appealed, GR cannot be liable for the penalties themselves. Second, neither the sales tax penalties nor the Delaware Franchise Tax obligation has been paid by SCS and there is no evidence that either will ever be paid by SCS. "[A]n essential element of the [professional negligence] cause of action . . . is proof of actual loss". Duke & Co., 275 Pa. Super. at 73-74, 418 A.2d at 617 (emphasis added). Since the sums have not been paid and probably never will be paid, the sums do not qualify as actual loss and SCS cannot recover damages for the sums.

  GR argues that it should not be liable for professional negligence because (a) SCS was contributorily negligent; (b) SCS had a non-delegable duty to timely file its returns and thus GR cannot be blamed for late filing; and (c) the claim is barred by the Pennsylvania statute of limitations. (See Defs. Mem. at 23-25.) The Court addresses each of these defenses in turn.

  Under Pennsylvania law, contributory negligence bars recovery if a plaintiff's negligence is a "substantial factor" in causing the loss. See Jewelcor Jewelers & Distribs., Inc. v. Corr, 552/80 373 Pa. Super. 536, 552, 542 A.2d 72, 80 (Pa.Super.Ct. 1988). "Contributory negligence is conduct on the part of a plaintiff which falls below the standard of care to which he should conform for his own protection and which is a legally contributing cause, cooperating with the negligence of the defendant, in bringing about the plaintiff's harm." Gorski v. Smith, 812 A.2d 683, 703, 2002 PA Super 334 (Pa.Super.Ct. 2002) (quotations omitted). "Contributory fault may stem either from a plaintiff's careless exposure of himself to danger or from his failure to exercise reasonable diligence for his own protection." Id. In the present case, the Court cannot conclude that SCS's negligence, if any, was a substantial factor in causing the losses. The number and type of GR's errors — missed deadlines, improperly filed appeals, filing appeals with the wrong agency, and misreading instructions — cannot be attributed to SCS in any way that would make SCS conduct a substantial cause of the subsequent losses.

  GR's second affirmative defense is similarly unavailing. GR is correct that a taxpayer has a non-delegable duty to make appropriate and timely filings with the tax authority. See United States v. Boyle, 469 U.S. 241, 249-50 (1985); McMahan v. C.I.R., 114 F.3d 366, 369-71 (2d Cir. 1997). However, that non-delegable duty applies as between the taxpayer and the tax authority, subjecting the taxpayer to penalties imposed by the tax authority even if the taxpayer's untimely filing was actually caused by the taxpayer's agent filing returns late. See McMahan, 114 F.3d at 371. That non-delegable duty does not prevent the taxpayer's recovery in a negligence action against the agent who caused the taxpayer to file late. See id. Indeed, accepting GR's erroneous construction of this duty would vitiate the tort of professional negligence or malpractice in any context involving a tax authority. The Court concludes that SCS's non-delegable duty does not vitiate its claim against GR.

  Finally, turning to GR's statute of limitations argument, the parties dispute whether Pennyslvania's statute of limitations, which is two years, or New York's statute of limitations, which is three years, should apply to this cause of action. (See Pl. Mem. at 69 (New York); Defs. Mem. at 23 (Pennsylvania).) A federal court sitting in diversity jurisdiction applies the forum state's choice-or-law rules and the statute of limitations that the forum state would apply under those choice-of-law rules. See Silva v. Toll Brother's Inc., No. 97 Civ. 0741 (DLC), 1998 WL 898307, at *1 (S.D.N.Y. Dec. 23, 1998). When a cause of action accrues outside the state of New York, as the parties agree is the case here, the applicable statute of limitations is determined by N.Y.C.P.L.R. § 202. See id. Under N.Y.C.P.L.R. § 202, when plaintiff is not a resident of the state of New York, the shorter statute of limitations applies. See id. at *2. However, when plaintiff is a resident of the state of New York, New York's statute of limitations applies, irrespective of which is shorter. See id. Sometimes this provision, coupled with New York's other choice-of-law rules, yields a result where a foreign state's substantive law applies in determining whether a plaintiff has established their claim, while New York's statute of limitations determines if such a claim is timely. See, e.g., id. (applying New York statute of limitations to claim governed by Connecticut law).

  A corporation, like SCS, is a resident of both the state in which it is incorporated and the state in which it has its principal place of business, if different from the state of incorporation. See 28 U.S.C. § 1332(c)(1). SCS is incorporated in Delaware and has its principal place of business in New York.*fn24 (See Compl. ¶ 1.) Since SCS is a resident of the state of New York, New York's statute of limitations applies to this claim. Thus, the Court shall apply New York law to determine whether SCS's claim is timely, though Pennsylvania law determines whether SCS has established its claim.

  Under New York law, a three-year statute of limitations applies to accounting malpractice claims. See N.Y.C.P.L.R. § 214(6); Ackerman v. Price Waterhouse, 84 N.Y.2d 535, 541, 644 N.E.2d 1009, 1011 (N.Y. 1994). "A malpractice cause of action sounds in tort and, therefore, absent fraud, accrues when an injury occurs, even if the aggrieved party is then ignorant of the wrong or injury". Ackerman, 84 N.Y.2d at 541, 644 N.E.2d at 1011. An injury occurs, and the statute of limitations begins to run, "upon the client's receipt of the accountant's work product since this is the point that a client reasonably relies on the accountant's skill and advice and, as a consequence of such reliance, can become liable for tax deficiencies". Id. at 541, 644 N.E.2d at 1012. However, the statute of limitation can be tolled pursuant to the doctrine of continuous representation, which "tolls the statute of limitations until the professional stops providing services to his client." Baff v. Redfield Blonsky & Co., No. 93 Civ. 3596 (MBM), 1995 WL 242107, at *2 (S.D.N.Y. Apr. 26, 1995). "The representation at issue must be in connection with the specific transaction which is the subject of the action, and not simply during the continuation of a general professional relationship." Id.

  SCS argues that the continuous representation doctrine applies to this cause of action. (See Pl. Mem. at 69-71.) Here, there are three specific transactions through which SCS sustained damages: the sales tax returns, the Business Privilege Tax, and the gross receipts taxes. Since this action was filed on September 28, 2001, for SCS's claim to be timely, GR's services on these transaction must have continued until at least September 28, 1998.

  With respect to the sales tax returns, though the erroneous work-product appeared in October 1996 when Earley filed a petition that only specified the state penalty and that misapplied the amnesty program provisions, GR continued to provide services on this transaction at least until November 2000, when Earley wrote a letter to the Pennsylvannia Attorney General. With respect to the Business Privilege Tax, GR failed to file a return in 1996, but continued representation on this matter until November 1998, when an amended return was finally filed. With respect to the gross receipts taxes, GR's continuous representation lasted until January 1999, when Earley recommended that SCS hire an attorney after having missed the deadlines to appeal. As all three of these transactions fall within the continuous representation doctrine and GR's services on these transactions continued past September 28, 1998, the Court concludes that SCS's claims are timely. Having considered GR's affirmative defenses and found them to be inapplicable to the present action, the Court holds that GR is liable to SCS for professional negligence in the amount of $49,431.52.*fn25 (See discussion supra at 24-25.)

  VI. Plaintiff's Fifth Cause of Action

  SCS argues that GR is liable for billing fraud in charging SCS for services not performed, failing to adhere to GR's own billing standards, and failing to charge SCS standard and reasonable rates. (See Pl. Mem. at 78.) As evidence of this fraud, SCS points to GR's sloppy billing records, GR's failure to provide SCS with information about how charges were calculated, and GR's failure to provide SCS with detailed explanations of the services invoiced. (See id. at 78-79.) Although SCS concedes "it is virtually impossible to identify specific instances" of over-billing, SCS argues that, "[w]hen combined with the pervasive negligence that has been demonstrated in this case," SCS should be permitted "to recoup all of the fees that it paid to the Defendants, absent a demonstration by the Defendants as to what portion, if any, were reasonable, proper and necessary." (Id. at 79-80.) The Court disagrees.

  "Fraud is a calculated deception, by single act or by several, by suppression of truth, or by suggestion of what is false, whether directly or by innuendo, by speech or silence, by word of mouth, look or gesture." Donahue v. W.C.A.B. (Philadelphia Gas Works), 856 A.2d 230, 236 (Pa.Commw. Ct. 2004). The party alleging fraud has the burden of proving the same by clear and convincing evidence. See id. The elements of that evidentiary burden are: (1) a misrepresentation, (2) knowledge of the misrepresentation, (3) intention by the misrepresenter that the recipient will be induced to act, (4) justifiable reliance by the recipient upon the misrepresentation, and (5) damage to the recipient. See id. at 237.

  In the present action, SCS has failed to prove by a preponderance of the evidence that GR's billing practices — as sloppy and opaque as they were — resulted in SCS being over-billed. Those same practices could have equally resulted in SCS being under-billed. SCS cannot shift its burden to prove fraud to GR with that demand that GR prove the absence of fraud. In addition, as discussed earlier, SCS and GR never formally agreed on billing rates or a rate structure. Yet, SCS paid GR's invoices for approximately five years, until April 2000. It is a little late now to argue credibly that GR's rates were unreasonable and to insist that GR prove that its rates were reasonable lest it risk forfeiting all the money paid over five years. To the contrary, SCS's payment for the duration of five years suggests that the rates were in fact reasonable. In short, SCS has not sustained its burden of showing that GR made any intentional misrepresentation with respect to billing matters, or that any alleged misrepresentation caused damage to SCS. Therefore, the Court declines to impose liability upon GR for billing fraud.

  VII. Plaintiff's Request for Punitive Damages

  SCS argues that it should be awarded punitive damages for GR's conduct. (See Pl. Mem. at 87.) SCS argues that GR's conduct in billing, retention of SCS documents, and conversion of $20,000 is particularly reprehensible. (See id.) Punitive damages are awarded in rare "cases of outrageous behavior, where defendant's conduct shows either an evil motive or reckless indifference to the rights of others." Slappo v. J's Dev. Assoc., Inc., 791 A.2d 409, 417, 2002 PA Super 18 (Pa. Super. Ct. 2002). Punitive damages are awarded to punish a defendant for that outrageous conduct and to deter him or others from engaging in similar conduct. Phillips v. Cricket Lighters, 852 A.2d 365, 373, 2004 PA Super 217 (Pa.Super.Ct. 2004). The standard under which punitive damages are measured in Pennsylvania requires analysis of the following factors: (1) the character of the act; (2) the nature and extent of the harm; and (3) the wealth of the defendant. See id.

  Considering these factors, the Court cannot conclude that punitive damages are appropriate here. Reviewing the conduct that SCS deems the most reprehensible, the Court notes that there is no persuasive evidence that GR over-billed SCS. Furthermore, some of the difficulties SCS experienced from GR's withholding of documents, at least in part, can be traced to SCS's own poor business practice of maintaining its documents in disarray. SCS's harm here has been strictly financial. GR's actions, while hardly exemplary, do not rise to the level of malevolent or reckless behavior that warrants the imposition of punitive damages.

  VIII. Defendants' Counterclaims

  GR argues that SCS is liable, under theories of breach of contract and unjust enrichment, for unpaid "fees, disbursements and finance charges invoiced" totaling $46,665.81.*fn26 (Defs' Mem. at 53.) To establish a claim for breach of contract, a plaintiff must prove: (1) the existence of a contract; (2) a breach of a duty imposed by the contract; and (3) resultant damage. See Presbyterian Med. Vtr. V. Budd, 832 A.2d 1066, 1070, 2003 PA Super 323 (Pa.Super.Ct. 2003). "Contracts are enforceable when parties reach mutual agreement, exchange consideration and have set forth terms of their bargain with sufficient clarity." Id. at 1071. In discussing SCS's professional negligence claim, see supra at 24, the Court earlier found that a contract existed between SCS and GR.*fn27 Although the parties did not formally agree on a rate structure, over the course of their relationship, GR regularly billed SCS for accounting services performed and SCS regularly paid GR for those services. By failing to pay GR for services rendered towards the end of their relationship, SCS breached a duty imposed by its contract with GR. However, with respect to the finance charges, SCS has introduced evidence showing that notice of possible finance charges was not included on invoices SCS initially received from GR. Thus, the Court finds that the parties did not agree to finance charges among the terms of their contract and SCS did not breach any duty — because it had no duty — to pay finance charges.

  SCS argues that the invoices do not prove that GR did "meaningful work" to earn those fees nor that the fees were reasonable and not overstated. (See Pl. Mem. at 42.) The Court disagrees. With the exception of services invoiced for $9,900 discussed below, GR has proved by a preponderance of the evidence that it performed services and that SCS did not pay for those services. (Ex. KKK.) There is no evidence that the services performed for these unpaid invoices were not "meaningful". Furthermore, as noted above, there is little evidence that GR over-billed or charged unreasonable rates. The Court finds that GR has proved by a preponderance of the evidence that (1) a contract existed between GR and SCS; (2) SCS breached a duty imposed by that contract in failing to pay outstanding invoices for services rendered; and (3) GR was damaged by SCS's breach.

  However, the Court finds that GR has not proved by a preponderance of the evidence that it has sustained damages for the full amount that it seeks. First, the Court concludes that GR has not proved by a preponderance of the evidence that charges for services totaling $9,900 were properly invoiced. (Tr. at 547; Ex. 72.) Second, given that SCS had no duty to pay for finance charges, GR's award cannot properly include damages for failure to pay finance charges. For these reasons, the Court concludes that SCS is liable for breach of contract in the amount of $33,114.75 for unpaid fees.


  For the foregoing reasons, SCS shall have judgment against GR as follows: (a) for the first cause of action, $20,000 plus the legal rate of interest from September 14, 2001; (b) for the second cause of action, $56,850; and (c) for the third cause of action, $49,431.52. In addition, SCS shall have judgment against David Gruber, jointly and severally with GR, for the first cause of action in the amount of $20,000 plus the legal rate of interest from September 14, 2001. GR shall have judgment against SCS for breach of contract in the amount of $33,114.75. Settle judgment on five days notice. The Clerk is directed to close this case. SO ORDERED.

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