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Weisman Celler Spett & Modlin, PC v. Trans-Lux Corporation

United States District Court, S.D. New York

February 6, 2014



JESSE M. FURMAN, District Judge.

Plaintiff Weisman Celler Spett & Modlin, P.C. ("Weisman Celler"), a New York-based law firm, brings this action against its former client, Defendant Trans-Lux Corporation ("Trans-Lux"), to recover amounts allegedly owed for professional services. (Am. Compl. (Docket No. 11) ¶¶ 6-8). In its Answer, Trans-Lux asserts five counterclaims: four for breaching, or aiding and abetting the breach of, a fiduciary duty; and one for unjust enrichment. Weisman Celler now moves to dismiss those counterclaims. For the reasons stated below, its motion is GRANTED in part and DENIED in part.


The following facts are taken from the Amended Complaint, the Counterclaims, and publicly available documents, and are assumed to be true for purposes of this motion. See, e.g., LaFaro v. N.Y. Cardiothoracic Grp., PLLC, 570 F.3d 471, 475 (2d Cir. 2009); Kramer v. Time Warner, Inc., 937 F.2d 767, 774 (2d Cir. 1991); Ross Stores, Inc. v. Lincks, No. 13 Civ. 1876 (SAS), 2013 WL 5629646, at *1 (S.D.N.Y. Oct. 4, 2013) (accepting as true, on a motion to dismiss a counterclaim, facts asserted in the complaint).

On July 2, 2012, Weisman Celler filed suit against Trans-Lux seeking the collection of approximately $600, 000 in unpaid legal fees. (Compl. (Docket No. 1); Am. Compl. (Docket No. 11)). The suit seeks fees for services rendered from March 2008 through July 2010, including services in connection with the sale of a Trans-Lux division (Am. Compl. ¶¶ 29-37) and Weisman Celler's representation of Trans-Lux in a derivative shareholder action brought in 2009 (the " Gabelli litigation") (Am. Compl., Ex. A, at 1-3; Id., Ex. B). The suit also seeks collection of unpaid monthly retainer fees. (Am. Compl. ¶¶ 38-46).

As noted, Trans-Lux asserts five counterclaims. The first three allege breach of fiduciary duty relating to: (1) Weisman Celler's role in the negotiation of a 2004 consulting agreement among Trans-Lux, Moving Images LLC, and one of Trans-Lux's directors, Richard Brandt ( id. ¶¶ 18-31); (2) Weisman Celler's simultaneous representation of Trans-Lux and Trans-Lux directors in the Gabelli litigation ( id. ¶¶ 40-52); and (3) allegedly excessive fees collected by Weisman Celler from 1995 to 2011 ( id. ¶¶ 59-64). The fourth counterclaim is that Weisman Celler aided and abetted Richard Brandt in breaching his fiduciary duty to Trans-Lux in connection with the 2004 consulting agreement. ( Id. ¶¶ 32-39). Finally, Trans-Lux alleges unjust enrichment based on the allegedly excessive fees collected through 2011. ( Id. ¶¶ 53-58).

As this brief description makes clear, both the claims and counterclaims in this case relate in part to the Gabelli litigation. In that case, a shareholder derivative action, the plaintiffs alleged that the individual directors of Trans-Lux - Richard, Matthew, and Thomas Brandt (the "Individual Gabelli Defendants") - breached their fiduciary duties to Trans-Lux and its shareholders. (Def.'s. Am. Ans. With Defenses and Counterclaims (Docket No. 52), at 10 ("Counterclaims") ¶ 15). Weisman Celler represented both Trans-Lux and the Individual Gabelli Defendants in the case, which settled in 2009. ( Id. ¶¶ 16, 43-44). As part of the settlement agreement, the Brandts agreed to resign their positions as board members. ( Id. ¶ 16). The Honorable Kenneth M. Karas of this Court approved the settlement agreement on September 16, 2009 (09 Civ. 830, Docket No. 18), and a slate of three new directors subsequently joined Trans-Lux's Board. (Counterclaims ¶ 18). In 2010, the new president of Trans-Lux fired Weisman Celler as the company's general counsel. ( Id. ¶ 17).

Weisman Celler now moves to dismiss Trans-Lux's counterclaims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure (Docket No. 57), principally arguing that they are barred by a release Trans-Lux executed to resolve the Gabelli litigation (the "Release") (Mem. of Law Supp. Plaintiff/Counterclaim-Defendant's Mot. Dismiss (Docket No. 59) ("Weisman Celler Mem.") 7-13; Reply Mem. of Law Further Supp. Plaintiff/Counterclaim-Defendant's Mot. Dismiss (Docket No. 63) ("Weisman Celler Reply Mem.") 1-8). Weisman Celler also argues that the fiduciary duty counterclaims fail because Trans-Lux has not adequately pleaded causation and damages. (Weisman Celler Mem. 13-16; Weisman Celler Reply Mem. 8-10).


To survive a Rule 12(b)(6) motion, a counterclaim-plaintiff must generally plead sufficient facts "to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also Ross Stores, Inc., 2013 WL 5629646, at *2 (applying ordinary motion to dismiss standards to counterclaims). A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). More specifically, the counterclaim-plaintiff must allege sufficient facts to show "more than a sheer possibility that a [counterclaim-]defendant has acted unlawfully." Id. A counterclaim that offers only "labels and conclusions" or "a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555. Further, if the counterclaim-plaintiff has not "nudged [his or her] claims across the line from conceivable to plausible, [the counterclaim] must be dismissed." Id. at 570.


As noted, Weisman Celler's principal argument is that the counterclaims are barred by the Release that Trans-Lux executed in resolving the Gabelli litigation.[1] To the extent relevant here, the Release provides that "the Trans-Lux Defendants" (defined in the settlement agreement to include both Trans-Lux itself as well as the Individual Gabelli Defendants),

as RELEASORS, release and discharge Plaintiff Gabelli Funds LLC, the Gabelli Parties, and each of the other defendants, as RELEASEES, and RELEASEES' respective... agents, heirs, executors, administrators, successors and assigns, fiduciaries and/or other legal representatives, from all... claims and demands whatsoever, in law, admiralty or equity, known or unknown, which the RELEASORS ever had, now have or hereafter can, shall or may have for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world to [June 22, 2009].... This release does not include any claims or rights of Releasor arising under this Agreement or any claims by Michael Mulcahy arising under his Employment Agreement with Trans-Lux or by Richard Brandt or Moving Images, LLC arising under the Consulting Agreement between Trans-Lux and Moving Images, LLC.

(Declaration of Howard S. Modlin Supp. Pl.'s Mot. Dismiss (Docket No. 58), Ex. C ("Settlement Agreement") 1, 11-12, & ¶ 7(b) (emphasis added)). On its face, therefore, the Release plainly releases Weisman Celler from claims asserted by Trans-Lux. It releases "each of the other defendants" - as well as their agents - from all claims asserted by Trans-Lux "from the beginning of the world" to June 22, 2009. The "other defendants" includes the Individual Gabelli Defendants ( see Settlement Agreement 1), and Weisman Celler represented the Individual Gabelli Defendants. (Counterclaims ¶ ...

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