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Thornapple Associates, Inc. v. Sahagen

March 12, 2007

THORNAPPLE ASSOCIATES, INC. PLAINTIFF,
v.
PETER D. SAHAGEN AND SAHAGEN CONSULTING GROUP, LLC, DEFENDANTS.



The opinion of the court was delivered by: John F. Keenan, United States District Judge

OPINION & ORDER

Plaintiff Thornapple Associates, Inc. ("Thornapple") commenced this action against Defendants Peter Sahagen and Sahagen Consulting Group, LLC (collectively, "Sahagen", or "Defendants") to recover $115,005.46, plus accrued interest, in unpaid charges for expert witness consulting services rendered by Thornapple on Sahagen's behalf during a securities arbitration in which Sahagen was a claimant. Pursuant to Rule 64 of the Federal Rules of Civil Procedure and New York's Civil Practice Law and Rules ("CPLR") sections 6201(1) and 6212(a), Thornapple moved for pre-judgment attachment of funds that had been paid or were about to be paid to Sahagen as a result of a settlement award obtained by Sahagen in an unrelated case pending in the Southern District. By Order dated February 22, 2007, the Court granted Thornapple's motion and ordered an attachment in the amount of $140,000 from the settlement award. This Decision, fully setting forth the reasons for the Court's Order, follows.

BACKGROUND

The following undisputed facts are derived from the parties' pleadings, affidavits and exhibits offered in support of and opposition to the motion for attachment.

Thornapple is a New Jersey consulting firm that provides expert witness services, primarily in arbitrations concerning investment disputes. Defendant Peter Sahagen is a California resident who is the sole member of Defendant Sahagen Consulting Group LLC, a Delaware limited liability company with an office in California that is not registered in New York. In late 2003, an attorney for Sahagen, Brian Wille ("Wille"), contacted Thornapple to discuss the possibility of Thornapple's providing expert rebuttal witness services on Sahagen's behalf in a pending securities arbitration, in which Sahagen, as claimant, was seeking approximately $400 million in damages from Salomon Smith Barney. Thornapple agreed to act as Sahagen's consultant and, on December 1, 2003, began to perform work on Sahagen's behalf.

Thornapple has submitted detailed time and disbursement entries for the work it performed on Sahagen's securities arbitration. The records show that, from December 2003 until the end of September 2004, Thornapple was called upon to perform only a minimal amount of work. On September 29, 2004, Wille sent Thornapple a retainer payment of $10,000 from funds deposited by Sahagen in his attorney's retainer account. On September 30, 2004, Thornapple sent Wille a retainer agreement, providing inter alia that Thornapple would charge Sahagen at a rate of $375 per hour for its services plus expenses. Wille confirmed that the retainer agreement had been sent to Sahagen for Sahagen to sign. However, Thornapple never received the signed retainer agreement back from Sahagen. Nevertheless, Thornapple continued to work on the arbitration. Thornapple's work increased substantially during the fall of 2004. During that time, Thornapple's vice-president, Robert Conner ("Conner") met frequently with Wille, other attorneys representing Sahagen, and Peter Sahagen himself in preparation for Conner's testimony as an expert witness at an upcoming deposition and at the arbitration hearing. During these meetings, Conner stated to Wille that Conner wanted Sahagen to sign Thornapple's retainer agreement. Wille assured Conner that "Sahagen would sign and return the agreement, that [Conner] was at no risk of not being paid for Thornapple's services, and that Sahagen was a multi-millionaire capable of paying." (Affidavit of Robert Conner ("Conner Aff."), ¶ 7.) At the arbitration hearing, Conner also expressed to Peter Sahagen his concerns regarding the unsigned retainer agreement, but Sahagen assured Conner that Thornapple would be paid for its services.

On December 13, 2005, Thornapple received an additional payment of $30,000 from Sahagen's attorneys. Thornapple continued to provide expert witness services until April 27, 2005, when Conner concluded his testimony at the arbitration hearing.

Thornapple's time records show that from December 1, 2003, when Thornapple began to work for Sahagen, until April 27, 2005, when the work concluded, Thornapple performed approximately 411 hours of billable work for Defendants at a rate of $375 per hour, and incurred approximately $742 in out-of-pocket expenses, for a total charge of $155,005.46.

Thornapple sent Sahagen an invoice on June 1, 2005, which provided a detailed accounting of the billable time expended and out-of-pocket expenses incurred by Thornapple and stated the outstanding balance of $115,006.46, a sum equal to the total charge less the $40,000 in payments that Sahagen had remitted. Sahagen did not respond to the June 1, 2005 invoice. In November 2005, Sahagen's arbitration was resolved in Salomon Smith Barney's favor, and Sahagen received no award. From January 2006 to July 2006, Thornapple sent six invoice reminders to Sahagen. In addition, in July 2006, Conner sent a letter to Sahagen's attorney in which Conner offered to meet with Sahagen in Los Angeles to discuss setting up a payment schedule for the outstanding balance. Neither Sahagen nor his attorneys responded to the repeated invoice reminders or to Conner's invitation to meet.

Thornapple commenced this action on August 23, 2006 with the filing of a summons and a complaint, in which Thornapple asserted claims for an account stated against Defendants, breach of contract, quantum meruit, and unjust enrichment. On December 15, 2006, Thornapple applied to the Court for pre-judgment attachment of a portion of the funds to be paid to Sahagen from a settlement awarded to Sahagen in Sahagen v. Tilles, No. 06 Civ. 03119 (HB) ("Tilles"), an unrelated case before Judge Harold Baer in the Southern District, on the grounds that Defendants were non-domiciliaries of New York and attachment was required in aid of continuing security pending final judgment. Thornapple requested that $131,390.29 of the settlement award be attached, an amount that comprised the $115,005.46 outstanding balance, plus accrued interest. By Order dated February 22, 2007, the Court granted Thornapple's motion, ordered that the sum of $140,000 from the Tilles settlement be attached, and further ordered that Thornapple post an undertaking of $10,000. This Decision follows.

DISCUSSION

Legal Standard

Under Rule 64 of the Federal Rules of Civil Procedure, attachment is available as a remedy "under the circumstances and in the manner provided by the law of the state in which the district court is held." Fed. R. Civ. P. 64. Thus, New York's law governing the issuance of attachments applies in this case. Section 6201(1) of the New York CPLR provides, in relevant part, that an order of attachment may be granted when "the defendant is a nondomiciliary residing without the state, or is a foreign corporation not qualified to do business in the state." N.Y. CPLR § 6201(1). Section § 6212 further requires that a plaintiff seeking a pre-judgment attachment show "[1] that there is a cause of action, [2] that it is probable that plaintiff will succeed on the merits . . . and [3] that the amount demanded from the defendant exceeds all counterclaims known to the plaintiff." N.Y. CPLR § 6212(a).

The provisional remedy of attachment is "a harsh remedy which should be construed strictly against those seeking to use it" and is "discretionary with the trial court." Reading & Bates Corp. v. Nat'l Iranian Oil Co., 478 F. Supp. 724, 726 (S.D.N.Y. 1976) (citations omitted). Thus, even if a plaintiff meets the statutory requirements set forth in CPLR sections 6201(1) and 6212(a), "it would still be possible to deny the harsh ...


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