SCHLAM STONE & DOLAN, LLP, as assignee of both RACHEL AREA and ALEXANDER SHPIGEL, Plaintiffs,
HOWARD R. POCH, HOWARD POCH, P.C, a/k/a HOWARD R. POCH ESQUIRE & ASSOCIATES, P.C, POCH & LUCKOW, P.C, and LANCE LUCKOW, Defendants.; Index No. 105769/11
Hon. Shlomo S. Hagler, J.S.C.
In this legal malpractice action, plaintiff Schlam Stone & Dolan, LLP Schlam Stone or plaintiff as assignee of both Rachel Arfa ("Arfa ") and Alexander Shpigel ("Shpigel") move for an order pursuant to CPLR § 3212 granting them partial summary judgment on the issue of liability. Defendants Howard R. Poch ("Poch"), Howard Poch, P.C., a/k/a Howard R. Poch Esquire & Associates, P.C., Poch & Luckow, P.C., and Lance Luckow (collectively, "defendants") oppose the motion.
Plaintiff is a law firm which obtained an "Assignment of Malpractice Claims Held By Rachel L. Arfa and Alexander Shpigel Against Attorney Howard Poch to Schlam Stone & Dolan LLP, " dated December 13, 2010 ("the Assignment"). (Exhibit "A" to the Affirmation of Christopher B. Hitchcock, Esq., dated October 21, 2011, in Support of the Motion ["Hitchcock Aff.].) By virtue of the Assignment, Arfa and Shpigel assigned their claims against Poch to Schlam Stone.
Arfa and Shpigel were members of various entities that owned and managed various properties in the Bronx, New York. They were the sole members and owners of Ocelot Capital Management LLC ("OCM"). (Exhibit "A" attached to the Affidavit of Howard R. Poch, sworn to on December 23, 2011, in Opposition to the Motion ["Poch Aff."].) OCM partnered with Eldan-Tech Inc. ("Eldan") to form Ocelot Portfolio Holdings LLC ("Ocelot Portfolio") to pursue real estate ventures. Eldan retained an eighty percent interest and OCM had a twenty percent interest in Ocelot Portfolio. However, OCM was the managing member of Ocelot Portfolio. (Id.) Ocelot Portfolio was sole member and owner of entities known as OCG I, LLC, ("OCG I") and OCG V, LLC ("OCG V"). OCG I owned 1268 Stratford Avenue, Bronx, New York, and OCG V owned 1524 Leland Avenue, Bronx, New York. (Exhibit "B" attached to the Poch Aff.) Ocelot Properties Management, Inc. ("OPM"), was the entity that managed the properties for OCG I and OCG V. Ocelot Capital Group, LLC ("OCG") owned OPM, which was controlled solely by Arfa and Shpigel. (Exhibit "C" attached to the Poch Aff.)
Arfa and Shpigel, on behalf of OPM, hired a retinue of people including senior officers Eytan Shafir ("Shafir"), who was the vice-president and chief of operations, Aryeh Spigel (Shpigel's brother) ("Aryeh"), and Andrew Schwab ("Schwab"), general counsel, to manage their portfolio of buildings. Valentino Mendez ("Mendez") acted as an agent and direct contact for processing litigation matters. Arfa and Shpigel delegated the day-to-day management of the properties to them. However, Arfa met regularly with Shafir to discuss certain matters including retaining counsel to efficiently handle their landlord-tenant litigation. Arfa and Shpigel also authorized Shafir to interview and retain counsel for the above purpose.
In late 2007, Shafir had discussions with Poch to retain him as OCM's landlord-tenant counsel. (Exhibit "E" attached to the Poch Aff.) The negotiations continued in the beginning of 2008, when the parties finally agreed via e-mail to Poch's retention at $5, 500 per month to handle all of OCM's landlord-tenant disputes. (Exhibit "G" attached to the Poch Aff.) However, no formal written retainer agreement was executed by the parties.
Poch then took over the old inventory of cases and started new ones. The custom and practice between the parties was that Poch communicated with Mendez and Aryeh on these cases. (Exhibits "H, " "I, " and "M" attached to the Poch Aff.) As part of his duties, Poch defended the various OCG entities in proceedings in Housing Court that the Department of Housing and Preservation and Development of the City of New York ("HPD") brought against them to repair certain violations in various buildings ("HP Proceedings"). Poch settled these HP Proceedings with consent orders requiring payment to HPD of civil penalties and fines by a date certain which would increase ten-fold if not timely paid. Poch advised Mendez and Aryeh of at least four defaults in payment and resulting increased penalties. (Exhibits "O" and "P" attached to the Poch Aff.)
Poch had advised Shafir, Aryeh and Schwab that HPD would not permit Poch to selectively choose which of the named respondents to represent in the HP Proceedings. In other words, HPD insisted that Poch appear and sign consent orders on behalf of all the named respondents. In the past, no one told Poch that he could not represent Arfa or Shpigel.
On June 24, 2008, Poch appeared with Aryeh in Bronx County Housing Court on two HP Proceedings: (1) HPD v. OCG I, Sido Sinai, Arie Spiegel and Alexander Shpigel, Index No. HP 32735/08/08 ("HP Proceeding 1"); and (2) HPD v. OCG V, Sido Sinai, Arie Spiegel and Rachel Arfa, Index No. HP 32736/08 ("HP Proceeding 2"). It should be noted that HPD, as petitioner, named Arfa and Shpigel as individual respondents in addition to the OCG entities. Poch asked Aryeh to confirm that he could enter consent orders on behalf of all the respondents, including Arfa and Shpigel, and that they understood and agreed to the terms. Aryeh made a phone call outside the courtroom, then returned and told Poch that he had the authority to enter into the consent orders. With Aryeh's assurance, Poch entered into a consent order settling HP Proceeding 1 wherein respondents agreed to correct more than 200 violations within a specified period and pay HPD a civil penalty of $6, 000 ("Consent Order 1"). (Exhibit "HH" attached to the Poch Aff.) Poch also entered into a consent order in HP Proceeding 2 along the same lines with respondents consenting to correct many more violations and pay a lesser sum of $3, 000 by October 24, 2008 ("Consent Order 2"). (Id.) On the same day that Poch entered into the consent orders, defendant Lance Luckow, Esq. ("Luckow"), sent an e-mail to Mendez, Shafir, Aryeh and Schwab explaining to them that HPD had named Arfa and Shpigel as individual respondents in HP Proceeding 1 and HP Proceeding 2. Moreover, Arfa and Shpigel had actually been named in multiple proceedings and had "exposure to civil penalties well exceeding] a million dollars due to the failure to correct violations." (Exhibit "R" attached to the Poch Aff.) On the very next day, Poch e-mailed Aryeh explaining that Arfa and Shpigel had personal liability under the consent orders (which had been mailed to Aryeh) premised under the Multiple Dwelling Law § 4(44), and in ten other HP Proceedings. (Exhibit "S" attached to the Poch Aff.) Significantly, Poch further advised that "if we fought having those names [Arfa and Shpigel] on the orders, we would not only have probably lost, but HPD would have pushed for full liability which, we estimated, could have been over a million dollars. We settled for $93, 000.00." (Id.) Notwithstanding Poch's warning, the OCG entities defaulted under several agreements and became liable for $230, 000. (Exhibit "X" attached to the Poch Aff.)
In HP Proceeding 1 and HP Proceeding 2, HPD brought Orders to Show Cause to punish the respondents for civil and criminal contempt for failing to correct more than 200 outstanding violations ("Contempt Proceedings"). (Exhibit "FF" attached to the Poch Aff.) Arfa and Shpigel separately cross-moved to dismiss the Contempt Proceedings and to vacate the Consent Orders on the grounds that they were not properly served with the papers in the Contempt Proceedings and Poch did not have the authority to personally represent them. (Exhibits "GG" and "HH" attached to the Poch Aff.). By Decision and Order, dated January 25, 2010, the Hon. Jerald R. Klein, J.H.C. denied the branch of the Arfa and Shpigel cross-motions to dismiss due to improper service and set the remaining issue down for a hearing to determine whether Poch had the authority to enter into the Consent Orders on behalf of Arfa and Shpigel. (Exhibit "JJ" attached to the Poch Aff.) After a lengthy hearing, Judge Klein found that Arfa and Shpigel had "approved" Poch's representation and denied their cross-motion to vacate the Consent Orders. (Decision and Order dated June 4, 2010, attached as Exhibit "N" to the Hitchcock Aff.) Arfa and Shpigel appealed Judge Klein's decision and order to the Appellate Term, First Department, which affirmed Judge Klein's order holding that Poch had actual and/or apparent authority to represent Arfa and Shpigel in the HP Proceedings. The Appellate Term further held that Arfa and Shpigel ratified the Consent Orders by waiting more than one year to contest the orders and at the same time reaped the benefits of the bargain. (Exhibit "O" attached to the Hitchcock Aff).
The movant under CPLR § 3212 has the initial burden of proving entitlement to summary judgment. (Winegrad v New York Univ. Med. Ctr., 64N.Y.2d 851 .) Once such proof has been offered, in order to defend the summary judgment motion, the opposing party must "show facts sufficient to require a trial of any issue of fact." (CPLR § 3212[b]; Zuckerman v City of New York, 49 N.Y.2d 557 ; Friends of Animals v Associated Fur Mfrs. , 46 N.Y.2d 1065 ; Freedman vChemical Construction Corp., 43 N.Y.2d 260 ; Spearmon v Times Square Stores Corp., 96 A.D.2d 552 [2d Dept 1983].) "It is incumbent upon a [litigant] who opposes a motion for summary judgment to assemble, lay bare and reveal [his, her, or its] proof, in order to show that the matters set up in [the] answer are real and are capable of being established upon a trial." (Spearmon, 96 A.D.2d at 553 [quoting Di Sabato v Soffes, 9 A.D.2d 297, 301 (1st Dept 1959)].) If the opposing party fails to submit evidentiary facts ...