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Smartix International Corp. v. Garrubbo

March 31, 2009


The opinion of the court was delivered by: John G. Koeltl, District Judge


The plaintiff, Smartix International Corporation, a.k.a. Smartix International, LLC ("Smartix"), brings this action against the law firm Garrubbo, Romankow & Capese, P.C. ("Garrubbo") and attorney Anthony Rinaldo, Esq., a member of the firm, alleging four claims of legal malpractice and one claim of unjust enrichment against both defendants, and one claim of breach of fiduciary duty solely against Mr. Rinaldo. The plaintiff bases its claims on the defendants' legal representation of the plaintiff between 2000 and 2004 in a variety of matters, including litigation against the plaintiff and contract negotiations between the plaintiff and MasterCard International Corporation ("Mastercard"). The defendants move for summary judgment with respect to each of the claims.



The standard for granting summary judgment is well established. Summary judgment may not be granted unless "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Gallo v. Prudential Residential Servs. Ltd. P'ship, 22 F.3d 1219, 1223 (2d Cir. 1994). "[T]he trial court's task at the summary judgment motion stage of the litigation is carefully limited to discerning whether there are genuine issues of material fact to be tried, not to deciding them. Its duty, in short, is confined at this point to issue-finding; it does not extend to issue-resolution." Gallo, 22 F.3d at 1224. The moving party bears the initial burden of informing the district court of the basis for its motion and identifying the matter that it believes demonstrates the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. The substantive law governing the case will identify those facts that are material and "only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

Summary judgment is appropriate if it appears that the non-moving party cannot prove an element that is essential to the non-moving party's case and on which it will bear the burden of proof at trial. See Cleveland v. Policy Mgmt. Sys. Corp., 526 U.S. 795, 805-06 (1999); Celotex, 477 U.S. at 322; Powell v. Nat'l Bd. of Med. Exam'rs, 364 F.3d 79, 84 (2d Cir. 2004). In determining whether summary judgment is appropriate, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citing United States v. Diebold, Inc., 369 U.S. 654, 655 (1962)); see also Gallo, 22 F.3d at 1223. Summary judgment is improper if there is any evidence in the record from any source from which a reasonable inference could be drawn in favor of the nonmoving party. See Chambers v. T.R.M. Copy Ctrs. Corp., 43 F.3d 29, 37 (2d Cir. 1994). If the moving party meets its initial burden of showing a lack of a material issue of fact, the burden shifts to the nonmoving party to come forward with "specific facts showing a genuine issue for trial." Fed. R. Civ. P. 56(e)(2). The non-moving party must produce evidence in the record and "may not rely simply on conclusory statements or on contentions that the affidavits supporting the motion are not credible." Ying Jing Gan v. City of New York, 996 F.2d 522, 532 (2d Cir. 1993); see also Scotto v. Almenas, 143 F.3d 105, 114-15 (2d Cir. 1998); Singh v. New York City Off-Track Betting Corp., No. 03 Civ. 5238, 2005 WL 1354038, at *1 (S.D.N.Y. June 8, 2005).


Jurisdiction in this action is based on diversity of citizenship and the parties agree that the law of New York provides the substantive law to be applied. "In a diversity action based on attorney malpractice, state substantive law, here that of New York, applies. To prevail on such a claim, [a plaintiff] must demonstrate that the attorney was negligent, that the negligence was a proximate cause of the injury and that [the plaintiff] suffered actual and ascertainable damages." Rubens v. Mason, 527 F.3d 252, 254-55 (2d Cir. 2008) (internal quotation marks and citations omitted); see also Tydings v. Greenfield, Stein & Senior, LLP, 843 N.Y.S.2d 538, 540 (App. Div. 2007). "Whether malpractice has been committed is ordinarily a factual determination to be made by the jury." Greene v. Payne, Wood and Littlejohn, 602 N.Y.S.2d 883, 885 (App. Div. 1993). "To succeed in a motion for summary judgment, the defendant in a legal malpractice action must present evidence in admissible form establishing that the plaintiff is unable to prove at least one of these essential elements." Lichtenstein v. Barenbaum, 803 N.Y.S.2d 916 (App. Div. 2005).

In a legal malpractice action, negligence is the failure to use the care, skill and diligence commonly possessed by a member of the legal profession. Id. "Expert testimony is normally needed to establish that the attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession, unless the ordinary experience of the fact finder provides sufficient basis for judging the adequacy of the professional service, or the attorney's conduct falls below any standard of due care." Northrop v. Thorsen, 848 N.Y.S.2d 304, 308 (App. Div. 2007) (internal quotation marks, citations and emphasis omitted); see also Merlin Biomed Asset Management, LLC v. Wolf Block Schorr & Solis-Cohen LLP, 803 N.Y.S.2d 552, 553 (App. Div. 2005). Both parties have produced expert witnesses in this matter.

"To establish proximate cause, the plaintiff must demonstrate that 'but for' the attorney's negligence, the plaintiff would have prevailed in the matter in question. The failure to demonstrate proximate cause mandates the dismissal of a legal malpractice action regardless of whether the attorney was negligent." Tydings, 843 N.Y.S.2d at 540 (internal quotation marks and citations omitted).

In order to satisfy the damages element of a legal malpractice claim, a plaintiff must demonstrate actual and ascertainable damages. "Mere speculation of a loss resulting from an attorney's alleged omissions is insufficient to sustain a prima facie case sounding in legal malpractice." Luniewski v. Zeitlin, 591 N.Y.S.2d 524, 526 (App. Div. 1992) (internal citation omitted).


The following facts are undisputed unless otherwise indicated. At all relevant times, the plaintiff, a Delaware corporation located in New York, was in the business of developing, implementing and marketing a form of technology intended to facilitate ticketing and fan loyalty programs with respect to sports teams ("smartcard" and "magstripe card" technology). Defendants Garrubbo and Rinaldo, a New Jersey law firm and an attorney at that firm licensed to practice law in New Jersey, respectively, provided legal services to the plaintiff during the relevant time period. (Defendants' Joint Local Rule 56.1 Statement of Material Facts ("Defts.' 56.1 Stmt.") ¶¶ 1-5; Plaintiff's Response to Deft.'s 56.1 Stmt. and Plaintiff's Counter Statement of Material Facts ("Pl.'s 56.1 Stmt.") ¶¶ 1-5.)

Among other legal services, the defendants represented the plaintiff in litigation brought against it by Barbara Metzger and BJM Associates, LLC (the "Metzger litigation") in the New York State Supreme Court. In the course of defending the Metzger litigation, which was eventually voluntarily dismissed through a joint stipulation, the defendants successfully moved for partial summary judgment, moved to compel certain discovery, and deposed the Metzger plaintiff and her husband, among other things. (Defts.' 56.1 Stmt. ¶¶ 12-18; Pl.'s 56.1 Stmt. ¶¶ 12-18.; Declaration of Melinda Dus ("Dus Decl.") Ex. 7.) According to the plaintiff, during the Metzger litigation the defendants billed the plaintiff for their preparation for and attendance at a sanctions hearing that resulted, at least in part, from Mr. Rinaldo's failure to attend a court-ordered mediation. (Pl.'s 56.1 Stmt. ¶ 58; Dus Decl. Ex. 8A.)

In November 2003, the defendants advised the plaintiff in negotiating and drafting a licensing contract with MasterCard (the "MasterCard Agreement" or "Agreement"). The MasterCard Agreement was intended, among other things, to give the plaintiff and MasterCard joint ownership of certain intellectual property developed in relation to the Agreement. (Defts.' 56.1 Stmt. ¶¶ 20-22; Pl.'s 56.1 Stmt. ¶¶ 20-22.) The plaintiff asserts that the Agreement was poorly drafted, allowing MasterCard to exploit it to the disadvantage of the plaintiff. (Pl.'s 56.1 Stmt. ¶¶ 21-22.)

Also during the course of the defendants' legal representation of the plaintiff, issues arose as to whether and to what extent the plaintiff should pursue the protection of its intellectual property. The defendants, who did not specialize in intellectual property matters, either retained or referred the plaintiff to the law firm Lerner, David, Littenberg, Krumholz & Mentilk LLP ("Lerner David") to assist in these issues. Lerner David provided the plaintiff with a report discussing various avenues the plaintiff could pursue with respect to protecting its intellectual property rights. The plaintiff's CEO at the time, William Henneberry, decided to forego pursuing the avenues discussed in the Lerner David report. The defendants represent that they played no part in Mr. Henneberry's decision. The plaintiff alleges that Mr. Henneberry lacked the authorization to act as CEO and to make decisions on the plaintiff's behalf. The ...

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