The opinion of the court was delivered by: Robert P. Patterson, Jr., U.S.D.J.
Pursuant to the Court's May 24, 2011 order after remand from the Court of Appeals for the Second Circuit directing Plaintiffs Lawrence Goetz and R&L Leasing ("Plaintiffs") and Defendants Peter Hershman and his former law firm Siegel O'Connor Zangari O'Donnell & Beck, P.C. ("Defendants") to brief the issue of prejudgment interest awarded to Plaintiffs pursuant to §37-3(a) of the Connecticut General Statutes ("Conn. Gen. Stat."), Plaintiffs and Defendants filed their respective memoranda of law on July 1, 2011.
For the following reasons, prejudgment interest of ten percent accruing from December 17, 2003 is awarded to Plaintiffs.
Plaintiffs' claims are based on Hershman's actions as an attorney during the time leading up to the dissolution of a 24 year business relationship between Goetz and Richard Volpe, a non-party to this action. The facts of the case were presented at trial through documentary evidence, the testimony of Goetz and Hershman, and the opinion testimony of expert witnesses regarding the standard of professional care and duty of loyalty that lawyers owe their clients under Connecticut law and whether, based on a set of assumed facts, Hershman's conduct fell below the required level of professional care and duty of loyalty. The following facts are relevant to this order.
Goetz and Volpe began doing business together in 1979, when they owned a company called Able Automotive which operated a number of Midas Muffler stores. (Trial Transcript ("Tr.") at 33, 35.) In or around 1984, Goetz and Volpe formed a real estate company -- R&L Leasing -- and through that company acquired the commercial real estate underlying the Midas Muffler stores. (Id. at 33.) In 1995, R&L Leasing became an LLC, with all interests in R&L leasing -- capital, income and voting rights -- split 50/50 between Goetz and Volpe. (Id. at 40; Plaintiffs' Trial Exhibit ("Pls.' Ex.") 1.) In 1996, Volpe suffered a severe injury and became permanently disabled, and due to his disability, withdrew from management of R&L Leasing. (Tr. at 33, 35-36.) Thereafter, Goetz and Volpe entered into a series of agreements that altered their interests in R&L Leasing. (Pls.' Ex. 2-5.) Goetz testified that by September 2003, Volpe had "expressed some displeasure and disagreement with the agreements" and "wanted to return to 50/50 [income distribution]." (Tr. at 46.)
On October 2, 2003, Goetz, Volpe, and Hershman, met at Hershman's office to discuss Volpe's issues. (Id.) At the meeting, Goetz and Volpe agreed that going forward: (1) both the equity interest and the income distribution in R&L Leasing would be split 55/45 in Goetz's favor; (2) Goetz and Volpe would have 50/50 voting rights (i.e. equal control in R&L Leasing); and (3) Goetz would receive 45% of any recovery from Volpe's then pending insurance claim related to his 1996 injury and subsequent disability.*fn1 (Id. at 47-52.) Goetz's testimony regarding the meeting is consistent with Hershman's notes from that meeting. (Id. at 52.) Goetz and Volpe instructed Hershman to draft the documents necessary to effectuate their agreement. (Id. at 50.)
It took over two months to formalize the October 2, 2003 agreement into a final agreement. (Id. at 54-55.) Draft agreement documents were circulated. (Id. at 55.) On November 7, 2003, Goetz mailed signed copies of the circulated agreement documents to Hershman and in the accompanying letter informed Hershman that he could distribute the final, signed agreement once he had received Volpe's signed copies. (Id. at 59.)
During this time, Goetz tried to contact Volpe to discuss the insurance litigation. (Id. at 63.) Goetz did not learn of Volpe's insurance litigation settlement until the end of November 2003, when Volpe informed him of the $700,000 settlement -- a figure lower than Goetz had been led to expect. (Id. at 63-64.)
On December 8, 2003, Goetz e-mailed Hershman, requesting dissemination of the final, signed agreement documents (including a letter from Volpe acknowledging Goetz's share of the insurance recovery). (Id. at 260-61.) By cover letter addressed to Goetz and Volpe dated as of December 11, 2003, Hershman released: (1) an agreement executed by both Goetz and Volpe dated as of December 31, 2002, that reflected the new income allocation, capital allocation and voting rights of R&L Leasing as agreed to at the October 2, 2003 meeting; (2) a letter executed by Volpe confirming that Goetz is entitled to 45% of the net proceeds from Volpe's insurance litigation; and (3) a letter executed by both Goetz and Volpe jointly releasing each other from any potential claims resulting from past income distributions (collectively the "2003 Agreement"). (Pls.' Ex. 6; Tr. at 66-67.)
On December 12, 2003, Volpe finalized his insurance litigation settlement, and the insurance company delivered a check for the settlement amount, payable to "Glenn Duhl, Esq., Trustee for Richard Volpe." (Pls.' Ex. 43; Tr. at 63.) On or about December 17, 2003, Defendants, after a deduction for certain legal fees and expenses, sent Volpe the balance of the proceeds from the insurance settlement. (See McNamara Affirmation, Feb. 26, 2010, ECF No. 99; Plaintiffs' Memorandum of Law in Further Support of Motion for an Award of Prejudgment Interest ("Pls.' Mem.") at 2; Tr. at 546.)
Unbeknownst to Goetz, sometime before the end of 2003, Volpe had discharged Siegel O'Conner as his counsel and retained new representation. (Tr. 68-69.) In January 2004, Goetz received a letter from Volpe's new counsel, and by mid-January, Goetz came to understand that Volpe was disavowing the 2003 Agreement, as well as two earlier agreements between Goetz and Volpe allocating ownership and income interests in R&L Leasing, and claiming that he owned 50% of R&L Leasing. (Id. at 69-71.) In early 2004, Goetz brought a lawsuit against Volpe, and the two entered into a "very lengthy and expensive court battle" in which Goetz sought to enforce the 2003 Agreement and to collect his share of the insurance litigation proceeds. (Id. at 98-100.) The Goetz v. Volpe lawsuit settled in April of 2006. (Id. at 101.) Under the terms of the settlement, the 2003 Agreement was not enforced. Instead, Goetz received 53% and Volpe received 47% of R&L Leasing and Goetz did not receive any portion of the insurance litigation proceeds. (Id.) Thereafter, this suit against Defendants for malpractice and breach of fiduciary duty was brought to obtain the difference between the Goetz v. Volpe settlement and what Goetz was entitled to under the 2003 Agreement.
As of late 2003, Goetz had known Peter Hershman for over 20 years, and Hershman had served as an attorney for Goetz personally, and for R&L Leasing since the early 1980s. (Id. at 36-37.) Goetz testified that in 2003, Hershman never discussed with him the possible implications of an attorney representing two parties who have an actual or potential conflict, nor did Hershman ever suggest that Goetz consult another attorney. (Id. at 91-92.) Goetz also testified that in 2003, he did not know -- and Hershman never told him -- that Volpe owed Hershman's law firm "a lot of money" in connection with Volpe's insurance litigation, (id. at 93,) ...