In accordance with the accompanying Memorandum Decision, it is hereby
ORDERED that the branch of defendants' motion to dismiss the Amended Complaint as to Richard Rappaport and Anthony Pintsopoulos for lack of personal jurisdiction, forum non conveniens, and under California's Mandatory Fee Arbitration Act, California Business and Professions Code, Section 6200, et seq is granted solely on the ground of lack of personal jurisdiction, and the Amended Complaint is severed and dismissed against Richard Rappaport and Anthony Pintsopoulos; and it is further
ORDERED that the branch of defendants' motion to dismiss the Amended Complaint as to all defendants for failure to state a claim is granted solely to the extent that the quantum meruit claim as against WestPark Capital, Inc. is severed and dismissed for failure to state a claim; and it is further
ORDERED that defendant WestPark Capital, Inc. shall serve its Answer to the Amended Complaint within 30 days of service of a copy of this order with notice of entry; and it is further
ORDERED that defendants shall serve a copy of this order with notice of entry upon plaintiff within 20 days of entry.
This constitutes the Decision and Order of the Court.
HON. CAROL R. EDMEAD, J.S.C.
In this action to recover legal fees allegedly due and owing, defendants WestPark Capital, Inc. ("WestPark"), Richard Rappaport ("Rappaport"), and Anthony Pintsopoulos ("Pintsopoulos") move to (1) dismiss this action pursuant to CPLR 302, 327, 3211(a)(7), and 3211(a)(8); and (2) dismiss the action under California's Mandatory Fee Arbitration Act, California Business and Professions Code, Section 6200, et seq.
Plaintiff, a New York law firm, alleges that defendants engaged plaintiff to provide legal services related to three class action securities actions: In Re China Intelligent Lighting and Electronics, Inc. Securities Litigation (pending in California); Scott v ZST Digital Networks, Inc. et al. (pending in California); and Schuler v NIVS IntelliMedia Technology Group, Inc., et ai, (pending in New York) (the "New York matter"). WestPark is an investment bank and securities brokerage firm located in California. Rappaport is WestPark's Chief Executive Officer and resides in California. Pintsopoulos is WestPark's former President and Chief Financial Officer and resides in Florida.
According to plaintiff, it entered into a written Engagement Agreement with WestPark dated May 12, 2011, wherein plaintiff agreed to provide legal services to defendants, and WestPark agreed to pay plaintiff, inter alia, hourly rates and expenses. Plaintiff also represented other parties, one with whom WestPark agreed to share in plaintiffs legal fees. Further, "upon information and belief, " the individual defendants agreed with WestPark to be responsible for plaintiffs legal fees. Plaintiff allegedly performed services for defendants until it was granted leave to withdraw as counsel in May 2012. Plaintiff alleges that defendants accepted plaintiffs services, were sent monthly invoices (from June 2011 through June 2012) for the work performed, and only made partial payments throughout that billing period, leaving a balance due and owing. As a result, plaintiff alleges claims for breach of contract, account stated, and quantum meruit against WestPark, and quantum meruit as against Rappaport and Pintsopoulos.
Thereafter, defendants filed a legal malpractice and overbilling action in California against plaintiff and other attorneys at the law firm. In that action, defendants claim that they instructed plaintiff to not do any work on the three matters unless it was strictly necessary. Instead, plaintiff performed needless and premature discovery-related work, failed to advise defendants that the Private Securities Litigation Reform Act of 1995 requires an automatic stay of discovery until it was shown that the securities complaint sufficiently pleaded a proper claim.
Defendants now move to dismiss this action against (I) Pintsopoulos and Rappaport for lack of personal jurisdiction, forum non conveniens, and under California's Mandatory Fee Arbitration Act, California Business and Professions Code, Section 6200, et seq. (the "Act"), and (ii) all defendants, for failure to state a claim.
Defendants argue that the Amended Complaint does not allege any jurisdictional facts, and that Rappaport and Pintsopoulos are residents of California and Florida, respectively. Plaintiff only represented them in the China Intelligent Lighting action pending in California, as they are not named in the other two actions. Neither of them has entered into any contract with plaintiff or transacted any business in New York. At most, they received legal services in their home state in a California action by attorneys admitted pro hac vice in a federal district court in California.
Defendants also contend that the Amended Complaint should be dismissed fox forum non conveniens. It is burdensome for New York courts to hear a California-centered dispute that arose out of legal services rendered in an action pending in California. Rappaport and Pintsopoulos can be sued in California, and California law applies to the dispute and potential counterclaims, which the California court is better suited to adjudicate. There would be a severe hardship on Rappaport and Pintsopoulos to litigate this action in New York. And, that plaintiff is a New York resident is not a reason to deny a. forum non conveniens motion, especially since it obtained pro hac vice admission in California.
In support of dismissal for failure to state a cause of action, defendants argue that plaintiffs mere allegation that it performed under the agreement, is insufficient to support a breach of contract claim. Plaintiff failed to allege (and cannot allege) that it performed its services "adequately" without overbilling WestPark for unauthorized, needless work. The account stated claim also fails because WestPark and Rappaport objected orally, and in writing on May 21, 2012, June 25, 2012 and July 23, 2012 to the statement of account on at least two occasions. WestPark's general counsel wrote to a partner of plaintiff, Jay Auslander ("Auslander") complaining of overbilling and inadequate and deficient legal services. And, the quantum meruit claim is unavailable to plaintiff since there is a valid written agreement that governs the parties' dispute. Moreover, under the applicable California law, the quantum meruit claim against Rappaport and Pintsopoulos fails because as shown by the invoices and imprecise time records, they did not agree to compensate plaintiff and plaintiff failed to plead (and cannot show) that it expected to be compensated by either of them individually. All of the time spent working on the three claims is billed to WestPark and the invoices are not directed to Rappaport and Pintsopoulos individually. Further, plaintiff failed to allege the reasonable value of its services rendered to them individually. As Rappaport and Pintsopoulos were not defendants in two of the three cases, there is no basis to hold them jointly and severally liable for the legal fees sought.
Further, plaintiffs failure to give Rappaport and Pintsopoulos written notice of their right to arbitrate the dispute prior to the service of any summons or claim or filing of an action against them as required under the Act §6201(a) is a ground to dismiss this action. And, Rappaport and Pintsopoulos hereby request arbitration, which triggers an automatic stay of this action, subject to vacatur only after a hearing. Rappaport and Pintsopoulos have not waived their rights to arbitration under the Act by filing the malpractice action in California because they were not given notice of their rights, are only seeking a declaratory judgment that California law applies to them, and any evidence of malpractice will only be admissible to the extent those claims bear upon the fees to which plaintiff is entitled.
In opposition, plaintiff argues that the Court has personal jurisdiction over the individual defendants pursuant to the Long Arm statute, CPLR 302(a). According to one of plaintiff s members, Natalie Shkolnik, plaintiff never heard of WestPark until Rappaport and Pintsopoulos contacted plaintiff in New York to request that plaintiff provide legal services to defendants in the class action matters in which they were named as parties. Emails demonstrate that Rappaport and Pintsopoulos assisted plaintiff in its representation of WestPark in connection with the New York matter. None of the attorneys who handled the three matters ever traveled to California in connection with representing defendants. Pintsopoulos sent plaintiff numerous emails to plaintiff concerning the successful dismissal of the actions against defendants. Rappaport and Pintsopoulos regularly communicated with plaintiff concerning ...