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Offshore Express, Inc. v. Milbank

March 13, 2007

OFFSHORE EXPRESS, INC., PLAINTIFF,
v.
MILBANK, TWEED, HADLEY & MCCLOY, LLP DEFENDANT.



The opinion of the court was delivered by: Honorable Paul A. Crotty, United States District Judge

OPINION AND ORDER

Plaintiff Offshore Express, Inc. ("OEI") brings this action alleging that Defendant Milbank, Tweed, Hadley & McCloy, LLP ("Milbank") committed malpractice in its representation regarding (1) a divisive reorganization of McAllister Towing and Transportation, Inc. ("Old MT&T") into an identically-named successor corporation ("New MT&T") and OEI; and (2) an arbitration over the respective tax obligations of the two successor corporations. Defendant now moves for summary judgment dismissing the malpractice claim relating to the reorganization as barred by the statute of limitations. The issue before the Court is whether Milbank's representation in the reorganization and arbitration was one continuous representation in regard to a specific legal matter, or two representations covering separate and distinct matters. If the former, this action is timely; if the latter, the motion for partial summary judgment must be granted.

FACTUAL HISTORY*fn1

I. The Reorganization Representation

On January 12, 1998, William Kallop ("Kallop"), then President and 50% shareholder of Old MT&T and currently the sole owner of OEI, executed an engagement letter, prepared by Milbank partner Michael Goroff ("Goroff"), setting the terms of Kallop's retention of the firm to "act as [his] counsel in connection with the proposed division of the stock and assets of [Old MT&T]." Affirmation of Geoffrey J. Ginos ("Ginos Aff."), Exhibit 1. The letter also stated that:

I will be the partner in charge of this assignment. On tax-related matter I will work closely with Dale Ponikvar, who has considerable expertise in transactions of this kind. One or more associates from within our mergers and acquisitions practice group will assist us, as appropriate. As the need for specialized expertise arises or more work is required to be done, more staff from within our firm will be added to the team.

Id. After extensive negotiations during which he was advised by Milbank, Kallop agreed to a Plan of Reorganization and Distribution Split-Off (the "Split-Off Agreement") with the other owners of Old MT&T. The Split-Off Agreement and supporting documentation, including a Tax Sharing Agreement (the "TSA"), was signed late in the day on July 31, 1998 and became effective on August 3, 1998.

II. Post-Reorganization Representation

Milbank's time records show 18 entries relating to the matter "McAllister-Division" between August 3 and September 9, 1998 reflecting work related to the Split-Off Agreement, the bulk of the work occurring from August 3 to August 6. The next entry occurred on September 29, 1998, when the records indicate that Scott Beechert ("Beechert"), a Milbank attorney, reviewed correspondence from New MT&T for one quarter of an hour. Kallop testified that he left New York for long periods of time following the closing, and it is undisputed that Milbank received correspondence from New MT&T intended for him. On October 2, Beechert spent two and three quarter hours reviewing and addressing such correspondence, relating to "sums due under contract." Ginos Aff., Exhibit 2.

On October 15, Beechert spent an hour reviewing correspondence from New MT&T and prepared a letter to Kallop which he sent the following day, October 16. Through the October 15 entry, time was still reported as relating to the "McAllister -- Division" matter. Id. Beechert's letter noted that he was forwarding copies of correspondence Milbank had received "regarding the reorganization of [MT&T and OEI]." Declaration of Hung G. Ta ("Ta. Dec."), Exhibit E. Some of this correspondence related to discharging a custodian who had been appointed for Old MT&T during the dispute leading to the reorganization and to New MT&T's termination of benefit package coverage of OEI employees. Beechert also noted that New MT&T had forwarded numerous invoices and claims for payment, and stated "we need to discuss with you whether these invoices will be, or should be, paid by OEI." Id. The letter concluded by stating, "Please call me at your earliest convenience to discuss these various items and how we are to proceed." Id.

As of October 26, 1998, Milbank began recording entries relating to a matter entitled "Offshore Express, Inc./Tax Dispute." The first entry under that code indicates that Beechert spent half an hour on "O/C with Goroff; memo to file." The memo recounted a phone conversation between Kallop and Beechert on October 22. According to the memo, Kallop declined Milbank's offer to take action on the issues noted in the October 16 letter, and said he would handle them and keep Milbank informed. The disputes between OEI and New MT&T covered in the October 16 letter became the subject of a 1999 omnibus arbitration proceeding. Milbank did not appear in this proceeding. Kallop testified that OEI retained "another law firm." Ta Dec., Exhibit C at 35-36.

III. The Tax Arbitration Representation

On November 25, 1998, Kallop and Dale Ponikvar spoke by phone regarding a dispute between New MT&T and OEI over OEI's proper portion, under the TSA, of Old MT&T's federal income taxes for 1997. On December 15, 1998, New MT&T commenced an arbitration against OEI under the provisions of the TSA. Milbank represented OEI in that arbitration and a later, similar arbitration covering the 1998 tax year. No new engagement letter was ever signed by Milbank and Kallop or OEI. The two arbitrations were eventually consolidated, and an arbitrator ...


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