United States District Court, S.D. New York
June 20, 2005.
GIACOMO A. CIOCCA, Plaintiff,
GREGOR N. NEFF and WHITMAN, BREED, ABBOTT & MORGAN, LLP, Defendants.
The opinion of the court was delivered by: LAURA TAYLOR SWAIN, District Judge
MEMORANDUM OPINION AND ORDER
Before the Court are the motions of Defendants Gregor N. Neff
("Neff") and Whitman, Breed, Abbott & Morgan ("Whitman, Breed")
(together, "Defendants") for summary judgment pursuant to Rule 56
of the Federal Rules of Civil Procedure. Plaintiff Giacomo A.
Ciocca ("Plaintiff" or "Ciocca") brings four causes of action:
(1) legal malpractice; (2) breach of contract; (3) breach of
fiduciary duty; and (4) promissory estoppel. The Court has
subject matter jurisdiction of Plaintiff's claims pursuant to
28 U.S.C. § 1332(a). For the following reasons, Defendants' motion
for summary judgment is granted in part and denied in part.
The following facts are undisputed except where characterized
as allegations or contentions. In the early 1990s, Ciocca was
Chairman and CEO of Megatrend Telecommunications, Inc.
("Megatrend"), a telecommunications company. (Dep. of Giacomo A.
Ciocca, Nov. 14, 2003 ("Ciocca Dep."), at 4.) In 1995, Megatrend
filed for bankruptcy protection. (Aff. of Gregor Neff ¶ 13.)
Megatrend had retained Neff (at the time a partner in the law
firm of Curtis Morris & Safford) to prosecute a patent
application. (Neff Aff. ¶ 11.) Megatrend was granted U.S. Patent
No. 5,631,947 (the "Patent") in 1997, and the rights to the
Patent were subsequently assigned to Ciocca in exchange for
releasing his creditor claims against Megatrend in connection
with the bankruptcy proceedings. (Decl. of Giacomo A. Ciocca ¶
Upon receiving a letter from Daniel A. DeVito, Esq., of Weil,
Gotshal, & Manges LLP, who represented a party interested in
purchasing Ciocca's rights to the Patent, Plaintiff retained Neff
(who was by then a partner at Whitman, Breed) to negotiate the
sale. (Ciocca Dep. at 36-38, Nov. 14, 2003.) During discussions
with Ciocca about the representation, Neff informed Ciocca that Neff had never been fully paid for the
patent prosecution, and that the outstanding debt was $60,000
($42,000 in fees, $18,000 in interest). (Neff Aff. ¶ 29.) Ciocca
and Neff agreed that the $60,000 would be paid from the proceeds
of the Patent sale. (Defs.' Rule 56.1 Statement ¶ 39; Pl.'s Rule
56.1 Statement ¶ 39.)
Topp Telecom, Inc. purchased the Patent for $850,000 on June
29, 1999. (Neff Aff. ¶ 47.) Topp Telecom, Inc., which
subsequently changed its name to TracFone Wireless, Inc.
("TracFone"), sued Ciocca for breach of contract with respect to
assignment of the Patent in an action styled TracFone Wireless,
Inc. v. Giacomo (a/k/a Jack) A. Ciocca, No. 02-CV-1252
(S.D.N.Y.). That action was dismissed pursuant to a stipulation
of the parties (the "TracFone Contract Litigation").
Ciocca alleges in his Amended Complaint in this action that the
Patent should have been appraised prior to the sale to TracFone.
(Am. Compl. ¶ 18.) He contends that the Patent was undervalued at
the time of sale. Ciocca further alleges that Neff, as his
attorney, never suggested a valuation of the Patent, and that he
would have agreed to have such a valuation performed. (Ciocca
Decl. ¶ 11; Ciocca Dep. at 44, Nov. 14, 2003.) Neff contends that
he suggested an "investigation of the market" to Ciocca, but that
Ciocca never instructed him to pursue one. (Neff Aff. ¶¶ 20, 47;
Dep. of Gregor Neff at 69.)
Plaintiff also alleges that Neff created a conflict of interest
by agreeing to represent TracFone prior to the conclusion of his
representation of Ciocca in the sale of the Patent. Neff avers
that his work for Plaintiff ended with the closing of the Patent
sale and that, when he properly informed Plaintiff of his
subsequent representation of TracFone, Plaintiff had no
objection. (Neff Aff. ¶¶ 49, 52.) Plaintiff asserts that Neff and
Whitman, Breed failed initially to disclose any understandings, agreements and/or
discussions among Neff, Whitman, Breed and TracFone (Am. Compl. ¶
14), and further alleges that Neff told him about representing
TracFone prior to the execution of the Patent sale and that
Ciocca never consented to the TracFone representation. (Ciocca
Dep. at 30, July 18, 2002.)
Summary Judgment Standard
Summary judgment shall be granted pursuant to Rule 56(c) of the
Federal Rules of Civil Procedure where "the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party
is entitled to judgment as a matter of law." Fed.R.Civ.P.
56(c). The initial burden is on the moving party to show the
absence of a genuine issue of material fact. Celotex Corp. v.
Catrett, 477 U.S. 317, 330 (1986); Am. Home Assurance Co. v.
Zim Jamaica, 296 F. Supp. 2d 494, 498 (S.D.N.Y. 2003). To defeat
a properly supported motion for summary judgment, the non-moving
party "must set forth specific facts showing that there is a
genuine issue for trial." Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 256 (1986). A dispute about a material fact is genuine
"if the evidence is such that a reasonable jury could return a
verdict for the nonmoving party." Id. at 248. In deciding a
motion for summary judgment, a court "must view the evidence in
the light most favorable to the non-moving party and draw all
reasonable inferences in its favor." Am. Cas. Co. of Reading,
Pennsylvania v. Nordic Leasing, Inc., 42 F.3d 725, 728 (2d Cir.
1994) (internal citation omitted). Collateral Estoppel/Res Judicata
Defendants contend that they are entitled to summary judgment
because the prior resolution of similar claims raised by Ciocca
in the TracFone Contract Litigation precludes Ciocca from raising
the claims he seeks to prosecute in this action. In that breach
of contract litigation, Ciocca asserted, but later withdrew,
counterclaims alleging that TracFone had retained Neff in the
course of negotiation of the Patent sale transaction in order to
undermine the negotiation process and obtain the Patent for a
more favorable price. The parties later settled their respective
claims and counterclaims, and the TracFone Litigation was
dismissed with prejudice pursuant to a so-ordered stipulation.
(TracFone Wireless, Inc. v. Giacomo (a/k/a/ Jack) A. Ciocca,
No. 02-CV-1252 (S.D.N.Y.), Stipulation and Order of Dismissal,
Dec. 12, 2002.)
Defendants assert that Plaintiff is precluded from litigating
the claims he raised in the previous litigation with TracFone,
which were withdrawn prior to disposition of the suit. As
Plaintiff and Defendants use the terms "res judicata" and
"collateral estoppel" interchangeably in addressing this issue,
the Court will address each doctrine separately.
Res judicata "applies to preclude later litigation if the
earlier decision was (1) a final judgment on the merits, (2) by a
court of competent jurisdiction, (3) in a case involving the same
parties or their privies, and (4) involving the same [claim, or]
cause of action." Teltronics Servs., Inc. v. Hessen,
762 F.2d 185, 190 (2d Cir. 1985). Res judicata operates so that "`[a]
final judgment on the merits of an action precludes the parties
or their privies from relitigating issues that were or could have
been raised in that action.'" Saud v. Bank of New York,
929 F.2d 916, 918-19 (2d Cir. 1991) (quoting Federated Dep't Stores,
Inc. v. Moitie, 452 U.S. 394, 398 (1981)). It applies "not only as to what was pleaded, but also as
to what could have been pleaded." Teltronics Servs., Inc.,
762 F.2d at 193.
Res judicata is clearly inapplicable here, as Defendant Neff
was not a party to the prior litigation between TracFone and
Ciocca, nor is he in privity with either of those parties.
In order for collateral estoppel to apply, "(1) the issues in
both proceedings must be identical, (2) the issue in the prior
proceeding must have been actually litigated and actually
decided, (3) there must have been a full and fair opportunity for
litigation in the prior proceeding, and (4) the issue previously
litigated must have been necessary to support a valid and final
judgment on the merits." Gelb v. Royal Globe Ins. Co.,
798 F.2d 38, 44 (2d Cir. 1986); see also Metromedia Co. v. Fugazy,
983 F.2d 350, 365 (2d Cir. 1992). "Generally speaking, when a
particular fact is established not by judicial resolution but by
stipulation of the parties, that fact has not been `actually
litigated' and thus is not a proper candidate for issue
preclusion." Mishkin v. Peat, Marwick, Mitchell, No. 86 Civ.
4301, 1988 U.S. Dist. LEXIS 12449, at *6 (S.D.N.Y. Nov. 7, 1988);
see also Lawlor v. National Screen Serv., 349 U.S. 322, 327
(1955) ("[j]udgment . . . unaccompanied by findings . . . [does]
not bind the parties on any issue . . . which might arise in
connection with another cause of action") (footnote omitted).
Ciocca's counterclaim regarding TracFone's retention of Neff
was never litigated; rather, it was withdrawn and the action
ultimately settled. Thus, there is no basis for the application
of collateral estoppel to preclude Ciocca from asserting his
claims in the instant case. Legal Malpractice
Under New York law, to succeed on a claim of legal malpractice,
a plaintiff must establish three elements: "(1) a duty, (2) a
breach of the duty, and (3) proof that the actual damages were
proximately caused by the breach of the duty." Ocean Ships, Inc.
v. Stiles, 315 F.3d 111, 117 (2d Cir. 2002) (quoting Tinelli v.
Redl, 199 F.3d 603, 606 (2d Cir. 1999) (internal citation
omitted)). Defendants assert that they are entitled to summary
judgment on the legal malpractice claim because (1) Neff did not
breach any duty owed to Ciocca; (2) there is no credible conflict
of interest claim; and (3) there is no showing that the alleged
legal malpractice was the proximate cause of Plaintiff's alleged
Plaintiff's legal malpractice claim is premised on allgations
that Neff: breached the standard of care and skill commonly
exercised by an ordinary member of the legal community when, as
an attorney who specializes in patent law, he failed to obtain an
appraisal of the Patent; failed to advise Ciocca that the Patent
should have been valued before Ciocca entered into the agreement
with TracFone; and failed to disclose "the existence of an
understanding, agreement and/or discussions between [Defendants]
. . . and TracFone relating to their prospective and/or actual
retention by or employment by TracFone. (Am. Compl. ¶ 18.)
"To survive summary judgment, the plaintiff in a malpractice
case cannot rest on his `allegations of what [he] views as
deficiencies in defendant's conduct as his attorney,' but must
offer `evidence to establish the standard of professional care
and skill that [defendant] allegedly failed to meet.'" Hatfield
v. Herz, 109 F. Supp. 2d 174, 179 (S.D.N.Y. 2000) (citing
Thaler & Thaler v. Gupta, 617 N.Y.S.2d 605, 606 (3d Dept.
1994)); see also Estate of Ginor v. Landsberg,
960 F. Supp. 661, 672 (S.D.N.Y. 1996), aff'd, 159 F.3d 1346 (2d Cir. 1998).
"The courts generally require malpractice plaintiffs to `proffer
expert opinion evidence on the duty of care to meet their burden
of proof in opposition to a properly supported summary judgment
motion.'" Hatfield, 109 F. Supp. 2d at 179 (quoting Estate of
Nevelson v. Carro, Spanbock, Kaster & Cuiffo, 259 A.D.2d 282
(1st Dept. 1999) (internal citation omitted)).
In support of his valuation-related allegations, Plaintiff
proffers the declaration of Robert Goldscheider, who represents
that he has fifty years' experience as a lawyer or consultant in
issues of intellectual property law and practice. (Goldscheider
Decl. ¶ 3.) Goldscheider opines that the prevailing practice for
attorneys representing a patent seller is to hire an expert to
value a patent where the attorney is unable personally to perform
the valuation. (Goldscheider Decl. ¶ 5.)
Defendants assert that they were retained only to negotiate the
sale of the Patent to the then-unknown buyer represented by Mr.
DeVito, that Neff carefully followed Ciocca's explicit
instructions as to strategy for the sale and negotiating
positions, that this course of action was reasonable, and,
therefore, that Neff did not negligently breach a duty. There are
thus genuine issues of material fact as to whether Neff failed to
exercise the "degree of care, skill, and diligence expected of a
member of the legal community," 675 Chelsea Corp. v.
Lebensfeld, No. 95 Civ. 6239, 1997 U.S. Dist. LEXIS 14076, at *5
(S.D.N.Y. Sept. 17, 1997), or whether Neff's action was "a
lawyer's choice of one course of action . . . among several
reasonable alternatives [which] does not constitute malpractice."
Ayala v. Fischman, No. 97 Civ. 6698, 2001 U.S. Dist. LEXIS
19761, at *12 (S.D.N.Y. Nov. 26, 2001).
Additionally, there are genuine issues of material fact with
respect to any actual or potential conflict of interest arising
from Neff's representation of TracFone for the foreign patent rights, including whether that representation began before,
during or after his representation of Ciocca in the sale of the
Patent and whether there was appropriate disclosure. The parties'
conflicting evidence relating to these issues frames triable
issues of fact regarding whether Neff engaged in dual
representation without disclosure and consent, and whether there
was a substantial adverse interest between TracFone and Ciocca
if, as Plaintiff alleges, Neff was representing TracFone and
Ciocca either sequentially or simultaneously. See Kaufman &
Kaufman v. Hoff, 213 A.D.2d 197, 198 (1st Dept. 1995); Greene
v. Greene, 391 N.E.2d 1355, 1358 (N.Y.Ct.App. 1979) (citing
Matter of Kelly, 244 N.E.2d 456, 461 (N.Y.Ct.App. 1968)).
Defendants' motion for summary judgment on the claim of legal
malpractice is, therefore, denied.
Breach of Contract/Breach of Fiduciary Duty
Plaintiff alleges that Defendants breached their contract with
Ciocca by "failing to provide to Ciocca legal services
customarily provided by competent attorneys and by attorneys
specializing in the field of patent law." (Am. Compl. ¶ 29.)
Plaintiff further alleges that Defendants breached their
fiduciary duty to Ciocca by failing to advise Ciocca "of
discussions, understandings or agreements between" Defendants and
TracFone "relating to the actual or potential retention or
employment of [Defendants] . . . by TracFone" and by failing to
seek a waiver from Ciocca with respect to such discussions,
understandings or agreements. (Am. Compl. ¶¶ 23, 24.) In his
opposition papers on the instant motion, Ciocca further asserts
that Defendants breached their fiduciary duty by demanding an
interest in the Patent sale in the amount of $60,000, which
Defendants aver represented unpaid fees and interest owed to Neff
for prosecuting the Patent application for Megatrend. (DR 56.1 ¶ 39;
PR 56.1 ¶ 39.) Defendants argue that Plaintiff's claims of breach
of contract and breach of fiduciary duty must be dismissed as a
matter of law, as duplicative of Plaintiff's malpractice claim.
New York law holds that, where a breach of contract or breach
of fiduciary duty claim is premised on the same facts and seeks
relief identical to that sought in a legal malpractice cause of
action, such claims are redundant and should be dismissed.
InKine Pharm. Co. v. Coleman, 305 A.D.2d 151, 152 (1st Dept.
2003) (citing Sonnenschine v. Giacomo, 295 A.D.2d 287 (1st
Dept. 2002)) ("The breach of contract and breach of fiduciary
duty claims were properly dismissed as duplicative, since they
arose from the same facts as the legal malpractice claim and
allege similar damages."); Estate of Nevelson v. Carro,
Spanbock, Kaster & Cuiffo, 290 A.D.2d 399, 400 (1st Dept. 1999).
Here, the malpractice and breach of contract claims arise from
the same facts and alleged legal obligations concerning Neff's
representation of Ciocca in the sale of the Patent. Plaintiff's
claim of breach of contract is redundant of the legal malpractice
claim, and is therefore dismissed.
Plaintiff's claim for breach of fiduciary duty, however, is not
entirely duplicative of the legal malpractice claim and thus
survives the instant motion. Although the underlying factual
assertions relating to disclosure of the alleged relationship
between Defendants and TracFone are the same, the standard of
proof applicable to the fiduciary duty claim is different from
that pertinent to the malpractice claim. Furthermore, to the
extent the fiduciary breach claim is premised on the demand for
payment of $60,000 debt, the relevant facts are not entirely
duplicative. Plaintiff alleges that Neff breached his fiduciary
duty by requiring Ciocca to pay a debt owed to Neff by the
bankrupt Megatrend. An attorney is "charged with a high degree of undivided loyalty to his client." Kelly v. Greason,
296 N.Y.S.2d 937, 943 (1968). In order to "prevail on a claim of
breach of fiduciary duty, plaintiffs must demonstrate a conflict
of interest which amounted merely to a `substantial factor' in
their loss. . . ." Estate of Re v. Kornstein Veisz & Wexler,
958 F. Supp. 907, 924 (S.D.N.Y. 1997); see also Milbank,
Tweed, Hadley & McCloy v. Boon, 13 F.3d 537, 543 (2d Cir. 1994).
There are genuine issues of material fact as to whether
Defendants created the impression that Megatrend's debt
obligation to Neff, which was apparently discharged in
Megatrend's bankruptcy proceeding, became Ciocca's debt
obligation, and whether Neff's request for payment was a
substantial factor in Ciocca's loss and therefore constituted a
breach of fiduciary duty. Defendants' motion for summary judgment
on the breach of fiduciary duty claim is, therefore, denied.
Plaintiff alleges that Defendants made promises to provide the
reasonable and customary legal services provided by competent
attorneys and attorneys specializing in patent law. Plaintiff
avers that he relied on Defendants' promise, thereby creating a
quasi-contract, the breach of which is remediable under a theory
of promissory estoppel. Defendants argue that Plaintiff's claim
for promissory estoppel must be dismissed as a matter of law.
Promissory estoppel sounds in contract theory. Restatement
(Second) of Contracts § 90 (1981). In the instant case, the
breach of contract claim has been dismissed because it is
redundant of the legal malpractice claim. The promissory estoppel
claim is likewise redundant and is therefore dismissed. CONCLUSION
Defendants' motion for summary judgment is granted as to
Plaintiff's Third and Fourth Claims for Relief (breach of
contract and promissory estoppel). Defendants' motion for summary
judgment is, however, denied with respect to Plaintiff's First
and Second Claims for Relief (legal malpractice and breach of
fiduciary duty). The parties are directed to contact the Chambers
of Magistrate Judge Henry B. Pitman promptly to schedule a
settlement conference and address any outstanding pretrial
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