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Cascione v. Purcigliotti

June 26, 2007


The opinion of the court was delivered by: Brieant, J.

Before the Court for decision in this diversity case are the following motions: 1) Defendants' Motion to Confirm an Arbitration Award (Docs. 51 and 60); Plaintiff's Motion to Vacate the Arbitration Award and for Partial Summary Judgment (Doc. 55); and Defendants' Cross Motion for Summary Judgment (Doc. 63).

Memorandum and Order

The facts presented below are undisputed or assumed to be true for the purposes of this motion only. For the reasons stated below, this Court confirms the award of the arbitrator.

As of early 1995, plaintiff Joseph Cascione was the controlling member of Cascione, Chechanover & Purcigliotti, P.C. ("CCP"), a successful law firm and New York Professional Corporation. At a time when legal ethics prevented sale of a law practice, Plaintiff was seeking a favorable arrangement by which he could retire and receive deferred compensation payments from CCP.*fn1 On January 9, 1995, Plaintiff entered into a series of Employment and Subscription agreements with his nephew, defendant Thomas Cascione, and defendant Michael Galluzzi. The Subscription agreements called for the individual Defendants to take over the operations of CCP. These agreements stated that Plaintiff held the rights to [all] 100 shares of CCP, being the owner of 75 shares, and having the right to purchase 25 from a [former] partner. The agreements called for deferred compensation to be paid to Plaintiff, at that point "believed to amount to $780,000", and states that the agreement "shall continue until such time as Joseph A. Cascione Esq. shall be fully paid his deferred compensation by the corporation and has tendered all of his shares back to the corporation, with any right title or interest in same."

On April 30, 1995, Plaintiff entered into a Deferred Compensation Agreement with CCP. The earlier subscription agreements had expressly incorporated by reference any such agreement to be made between Plaintiff and CCP. The Deferred Compensation Agreement provided that Plaintiff would be paid deferred compensation over the course of the next ten years "in recognition and consideration of the Former Employee's years of past service to the Corporation." The amount to be paid was $780,000.00, with payments to be made on a monthly basis, in the amount of $6,500, for ten years.

Soon after the individual Defendants took over control of CCP, they claim they realized that the firm was suffering from financial difficulties, because of pending claims, and the fact that former partners had taken their cases with them. In April 1996, the individual Defendants decided to "wind down" CCP and formed a new law firm, called Cascione, Purcigliotti & Galluzzi, P.C. ("CPG"). The individual Defendants soon thereafter stopped practicing law through CCP. However, it is undisputed that Defendants continued to pay $6,500 to Plaintiff every month until April of 2005, at which time Plaintiff had received the sum of $780,000.00, as was called for by the Subscription and Deferred Compensation agreements. Plaintiff rejects the contention of Defendants that they wound down the affairs of CCP for valid business reasons, and charges them with "looting" the law firm. In light of the Arbitrator's award and full payment by Defendants of his Deferred Compensation, Plaintiff lacks the standing to complain of this looting.

When the deferred compensation period came to an end in April 2005, a dispute arose between the parties as to whether Plaintiff was required to tender back the 100 shares of CCP based on the deferred compensation payments already made, or whether Defendants were required to pay some additional consideration to be determined, in order to purchase the 100 shares at fair market value. On May 2, 2005, defendant Thomas Cascione wrote to Plaintiff that the terms of the DC Agreement had been satisfactorily completed, and stated:

Your interest in the stock Cascione, Chechanover & Purcigliotti PC (Originally Sacco, Rowen, Downes & Cascione, P.C.) is now terminated. The records of the corporation show that the stock was issued to 'Thomas Cascione in trust for Joseph Cascione' and therefore I will transfer the stock back to the corporation on your behalf. If you retain the original certificate please return it to us for the corporate records. This transfer is without further consideration and is not a taxable event as the corporation has no assets and has not operated as a law practice for several years. We expect to dissolve the corporation later this year. Consistent with the completion of the agreement, we will no longer provide you gratis legal counsel and are taking your name off of all letterhead. We are all pleased to have been able to honor the agreement and see this through to completion.

Plaintiff refused to hand over the shares, if indeed he has them, and Defendants refused to pay any further consideration for the shares. This action ensued. Plaintiff filed his First Complaint in this Court on August 12, 2005 which this Court dismissed on October 31, 2005, with leave to amend. Plaintiff filed the Amended Complaint on December 21, 2005. (Doc. 17).

The Amended Complaint asserts a derivative shareholder action against Defendants. Essentially, the Amended Complaint alleges that Defendants conspired to form the new firm CPG, without the knowledge of Plaintiff, and fraudulently diverted all of CCP's assets to that new corporation, "and otherwise waste[d] the assets of CCP", to the detriment of the shareholders of CCP. Among the assets Plaintiff alleges were fraudulently diverted from CPP to CPG are: cash deposits in the approximate amount of $200,000; open pending cases, valued at $2,000,000; legal fees due to CCP generated by these cases; and active client lists valued at $1,000,000. Plaintiff also alleges that Defendants fraudulently diverted accounts receivable, office equipment and furniture, a leasehold interest, and goodwill.

Defendants moved to dismiss the Amended Complaint, or in the alternative to compel arbitration pursuant to the arbitration clauses in the subscription agreements. Plaintiff cross moved for summary judgment. On April 24, 2006, this Court granted Defendants' motion to compel arbitration, holding that "the Subscription and Deferred Compensation Agreements are so central and inextricably linked to the allegations in the Complaint that arbitration may properly be compelled in this case, and jurisdiction retained over the action pending such arbitration." The Court also denied the motions for summary judgment with leave to renew following arbitration.


The arbitration proceeding was conducted on January 25 and 26, 2007. Counsel agreed to a standard form decision under AAA Rules, which need not be "reasoned," but this one is. See Exhibit 13, dated December 4, 2006. The issue before the arbitrator was whether Plaintiff, "having been paid his deferred compensation, is required without further consideration to tender to CCP the CCP shares he owns and controls", or instead, as Plaintiff argued, "Thomas Cascione and Galluzzi are only now entitled to purchase the shares from him at fair market value or other unspecified reasonable value." [Award, p.3, emphasis in original]. The arbitrator noted at the outset that ...

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