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Millennium Import, LLC v. Reed Smith LLP

Supreme Court of New York, First Department

January 24, 2013

Millennium Import, LLC, Plaintiff,
v.
Reed Smith LLP, et al., Defendants. Reed Smith LLP, et al., Third-Party Plaintiffs-Appellants, James H. Berry, Jr., et al., Third-Party Defendants-Respondents.

Reed Smith LLP, Douglas J. Wood and Darren B. Cohen appeal from judgments of the Supreme Court, New York County (Milton A. Tingling, J.), entered November 15, 2011, July 6, 2011 and July 18, 2011, dismissing the third-party complaint as against third-party defendants James H. Berry, Jr. and Berry & Perkins, Barack, Ferrazzano, Kirschbaum & Nagelberg LLP and Fross, Zelnick, Lehman & Zissu, P.C., respectively. Appeals from the orders, same court and Justice, entered March 30, 2011, July 6, 2011 and July 18, 2011, which granted third-party defendants' motions to dismiss the third-party complaint.

Schulte, Roth & Zabel, LLP, New York (Robert M. Abrahams of counsel), and Riker, Danzig, Scherer, Hyland, & Perretti LLP, New York (Anthony J. Sylvester of counsel), for appellants.

Furman, Kornfeld & Brennan, LLP, New York (Andrew R. Jones, A. Michael Furman and Bain R. Loucks of counsel), for James H. Berry, Jr. and Berry & Perkins, respondents. Coughlin Duffy, LLP, New York (Daniel F. Markham f counsel), and Figliulo & Silverman, P.C., Chicago, Il (James R. Figliulo of the bar of the States of Arizona and Illinois, admitted pro hac vice of counsel) for Barrack, Ferrazzano, Kirschbaum & Nagelberg, LLP, respondent.

Eaton & Van Winkle, LLP, New York (Robert S. Churchill, Bonnie R. Kim and Katherine P. Churchill of counsel), for Fross, Zelnick, Lehrman & Zissu, P.C., respondent.

Peter Tom, J.P. Richard T. Andrias Rolando T. Acosta David B. Saxe Karla Moskowitz, JJ.

OPINION

SAXE, J.

This is a legal malpractice action in which defendant law firm brought third-party claims for contribution against three other law firms based on the allegation that they gave erroneous advice to plaintiff, either directly or through plaintiff's parent company, that contributed to plaintiff's losses. The motion court granted the dismissal motion of each of the three firms, citing Hercules Chem. Co. v North Star Reins. Corp. (72 A.D.2d 538 [1st Dept 1979]), on the ground that defendants' affirmative defense of negligence on the part of plaintiff and/or its agents precluded the third-party complaint for contribution against the agents. This appeal therefore requires us to decide whether, under Hercules Chem. Co., defendants' affirmative defense of comparative negligence, based in part on the alleged malpractice of the other firms, precludes its third-party claims.

Plaintiff Millennium is a beverage company owned by luxury goods company LVMH, the owner of such brands as Louis Vuitton, Moet and Hennessy. Plaintiff marketed a high-end Polish vodka in the United States under the brand name "Belvedere, " but was sued by a California winery (the winery), also named Belvedere, for trade-name infringement. The dispute was resolved by a settlement agreement in which plaintiff agreed to pay the winery $30, 000 per year for a license to use the Belvedere name for its vodka; the agreement did not cover use of the Belvedere name for distilled spirits.

Plaintiff's Belvedere vodka was highly successful, rendering the licensing fee "nominal." In what the parties acknowledge was likely an attempt to renegotiate the licensing fee, in March 2004, the winery wrote to plaintiff, stating that it was negotiating with a distributor of gin for a license of the Belvedere name.

Plaintiff forwarded the letter to defendant law firm Reed Smith, as one of its attorneys, and Reed drafted a response. In addition to sharing the draft response with plaintiff, Reed Smith also forwarded it to LVMH and LVMH's counsel, third-party defendant law firm Barack, Ferrazzano, Kirschbaum & Nagelberg (the Barack firm). The letter was sent to the winery in April 2004. It asserted, among other things, that plaintiff, through its successful use of the mark, had obtained certain rights in the mark, and that the gin distributor might be liable to plaintiff for "passing off" its gin as associated with plaintiff's vodka.

The winery did not respond for some 15 months. During that time, LVMH became the 100% owner of plaintiff. In the winery's response in July 2005, it stated that the Barack firm's letter was a challenge to the winery's right to license the mark, and therefore a breach of the licensing agreement, and demanded that plaintiff cure the breach.

To this end, plaintiff had California counsel, third-party defendant Berry & Perkins (the Berry firm), prepare a draft response. The draft was shared with LVMH and Reed Smith, as well as with the Barack firm. The response sent to the winery also incorporated analysis by third-party defendant Fross, Zelnick, Lehrman & Zissu (the Fross firm), another law firm advising LVMH on plaintiff's rights under the licensing agreement. The response maintained that a gin distributor's use of the Belvedere mark might infringe on rights acquired by plaintiff.

The winery then sued plaintiff for breach of the licensing agreement, and was ultimately granted summary judgment on its claims. Rather than appeal, plaintiff entered into a settlement agreement that included a payment to the winery of $83 million. Plaintiff then sued Reed Smith for malpractice. Reed Smith asserted an affirmative defense of contributory fault against plaintiff and its agents, and then brought a third-party action against the Berry, Barack and Fross firms seeking contribution under CPLR 1401, contending that their negligence with regard to advising plaintiff and/or LVMH contributed to plaintiff's loss.

The motion court granted third-party defendants' separate motions to dismiss the third-party complaint against them solely in reliance on the holding of Hercules Chem. Co. (72 A.D.2d 538), that a defendant's affirmative defense of comparative negligence precludes a third-party claim for contribution against any third-party defendant who was acting as the plaintiff's agent, since ...


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