The opinion of the court was delivered by: Kenneth M. Karas, District Judge
On April 6, 2007, Plaintiff Elizabeth Margrabe ("Plaintiff") filed this diversity action, seeking recovery from her prior counsel, Defendants Sexter & Warmflash P.C. ("Sexter & Warmflash"), David Warmflash, and Michael Present (collectively, "Defendants"), for claims in alleged legal malpractice, breach of fiduciary duty, prima facie tort, and intentional infliction of emotional distress. Before the Court are Defendants' collective motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), as well as Plaintiffs' objection to Magistrate Judge Yanthis's denial of Plaintiff's Motion to Stay or Remove the Action pending the resolution of a motion to reargue and an appeal of a New York Supreme Court proceeding.
Although the Court will assume the Parties' general familiarity with the factual and procedural background of this case as set forth in Magistrate Judge George Yanthis's Report & Recommendation dated May 23, 2008 ("R&R"), the Court will briefly summarize the facts most salient to these Motions.*fn1 In considering Defendants' Motion to Dismiss, the Court assumes the facts taken from Plaintiff's Complaint to be true.*fn2
This case arises out of Defendants' representation of Plaintiff in a shareholder derivative suit brought in New York Supreme Court, Westchester County, Margrabe, et al. v. Rusciano, et al., Index No. 10032/01 (N.Y. Sup. Ct. 2001) (the "Rusciano Lawsuit"), presided over by Justice W. Denis Donovan. (Compl. ¶ 19.) Plaintiff and her brother, Anthony Rusciano III ("Tony Rusciano"), retained the Defendant law firm Sexter & Warmflash to prosecute the Rusciano Lawsuit against their cousin, Anthony J. Rusciano II. (Id. ¶¶ 14-15, 19.) The parties settled the Rusciano Lawsuit on May 10, 2004, with Plaintiff agreeing to sell her interests in the Rusciano family business as part of the settlement agreement. At the settlement proceedings, Plaintiff acknowledged that she understood the terms of the settlement and was "very pleased" with its terms and with her representation by Sexter & Warmflash. (Aff. of A. Michael Furman ("Furman Aff."), Ex. C (Tr. of Rusciano Proceedings (June 18, 2003) 38); Compl. ¶ 23.) As a result of the settlement, Plaintiff received consideration in the amount of $4,187,500. (Compl. ¶ 21.) Following the settlement, Plaintiff terminated her employment of Defendants in a letter dated April 9, 2004 (the "Discharge Letter"). (Id. ¶ 34.)
On May 14, 2004, Sexter & Warmflash commenced a N.Y. Judiciary Law § 475 fee dispute proceeding against Plaintiff in New York Supreme Court, Westchester County (the "Fee Dispute"). (Compl. ¶ 37.) Plaintiff opposed Sexter & Warmflash's application for fees on the basis that: (1) the Retainer Agreement entered into between the Plaintiff and Sexter & Warmflash was "unreasonable, excessive, and usurious"; and (2) that Sexter & Warmflash acted in conflict with and adverse to the interests of Plaintiff while serving the interests of its other joint client, Plaintiff's brother, Tony Rusciano. (Furman Aff., Ex. P (Rusciano, Index No. 10032/01, Decision and Order 3-5 (N.Y. Sup. Ct. July 9, 2007)).) The New York Supreme Court twice found in favor of Sexter & Warmflash, on September 1, 2004 and August 22, 2005, but later granted a motion to renew by Plaintiff on June 29, 2006. (Id. 2-3.) Plaintiff placed $121,659.74 in escrow pending a determination of the Fee Dispute between the parties. (Compl. ¶ 36.) On July 9, 2007, Justice Donovan reinstated his original finding that Sexter & Warmflash was not terminated for cause and was entitled to the full amount of fees. Plaintiff subsequently filed a motion to reargue the New York Supreme Court decision, which was denied by Justice Donovan (Dkt. No. 27), and a Notice of Appeal to the Appellate Division that was also denied on October 14, 2008 (Letter from A. Michael Furman, Esq. to the Court (Oct. 20, 2008) (attaching Margrabe v. Rusciano, 865 N.Y.S.2d 339 (App. Div. 2008))). On January 20, 2009, the Court of Appeals denied Plaintiff's leave to appeal the October 14, 2008 decision by the Appellate Division. (Letter from A. Michael Furman, Esq. to the Court (Jan. 22, 2009) (attaching January 20, 2009 Decision and Order by the New York State Court of Appeals).)
On or about May 17, 2004, Sexter & Warmflash filed a defamation action, Sexter & Warmflash, P.C. v. Margrabe, Index No. 107569/04 (N.Y. Sup. Ct. 2004) (the "Defamation Action"), against Plaintiff and her husband premised on the Discharge Letter, which contained quotations from the Discharge Letter and annexed it as an exhibit. (Compl. ¶¶ 39-40.) On March 17, 2005, the Supreme Court denied a motion to dismiss by Plaintiff and her husband and granted Sexter & Warmflash's cross motion for partial summary judgment as to liability with respect to the portion of Sexter & Warmflash's defamation claims based on accusations of usury. See Sexter & Warmflash, P.C. v. Margrabe, 828 N.Y.S.2d 315, 322 (App. Div. 2007). On January 4, 2007, the Appellate Division reversed the state supreme court's ruling and dismissed the case with prejudice. See id. at 327-28.*fn3
Plaintiff filed her action in this Court on April 6, 2007, alleging legal malpractice, breach of fiduciary duty, prima facie tort, and intentional infliction of emotion distress.
On October 26, 2007, Plaintiff moved to stay or transfer the action to the suspense calendar pending the resolution of Plaintiff's motion to reargue and notice of appeal in New York state court regarding the Fee Dispute. (Dkt. No. 13.) In an Order issued the same day as the R&R, Magistrate Judge Yanthis denied this motion. (Dkt. No. 27.) On October 29, 2007, Defendants filed a motion pursuant to Federal Rule of Civil Procedure 12(b)(6), seeking an order to dismiss Plaintiff's Complaint because: (1) res judicata and collateral estoppel precluded Plaintiff's claims; (2) Plaintiff's claims are time-barred; and (3) Plaintiff fails to allege any cognizable cause of action as a matter of law. In the R&R, Magistrate Judge Yanthis recommended that Defendants' motion to dismiss be granted. Plaintiff timely filed objections to the R&R and a timely appeal of Magistrate Judge Yanthis's denial of Plaintiff's Motion to Stay on June 2, 2008. (Dkt. Nos. 28 & 29.)
For the reasons set forth below, the Court grants Defendants' motion. The Court is also not reversing Magistrate Judge Yanthis's Order denying Plaintiff's stay application.
1. Review of Magistrate Judge's Report & Recommendation
A district court reviewing a report and recommendation addressing a dispositive motion "'may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge.'" 28 U.S.C. § 636(b)(1); see also Donahue v. Global Home Loans & Fin., Inc., No. 05-CV-8362, 2007 WL 831816, at *1 (S.D.N.Y. Mar. 15, 2007). Under 28 U.S.C. § 636(b)(1) and Federal Rule of Civil Procedure 72(b), parties may submit objections to the magistrate judge's report and recommendation. The objections must be "specific" and "written," Fed. R. Civ. P. 72(b)(2), and must be made "[w]ithin 10 days after being served with a copy of the recommended disposition." Id.; see also 28 U.S.C. § 636(b)(1).
Where a party submits timely objections to a report and recommendation, as Plaintiff has here, the district court reviews de novo the parts of the report and recommendation to which the party objected. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b)(3); Donahue, 2007 WL 831816, at *1. The district court "may adopt those portions of the . . . report [and recommendation] to which 'no specific written objection' is made, as long as the factual and legal bases supporting the findings and conclusions set forth in those sections are not clearly erroneous or ...