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Ray Legal Consulting Group v. DiJoseph

United States District Court, S.D. New York

August 8, 2014

RAY LEGAL CONSULTING GROUP, Plaintiff,
v.
ARNOLD E. DiJOSEPH, III, et al., Defendants

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For Ray Legal Consulting Group, Plaintiff: John H. Ray, III, Ray Legal Consulting Group, Hanover, MA.

For Arnold E. DiJoseph, III, Defendant: Arnold Edward DiJoseph, III, Arnold E. Dijoseph, PC, New York, NY.

For Arnold E. DiJoseph, P.C., Defendant: Arnold Edward DiJoseph, LEAD ATTORNEY, III, Arnold E. Dijoseph, PC, New York, NY.

For Stacey M. Gray, Stacey M.Gray, P.C., Defendants: Stacey M. Gray, Stacey M. Gray P.C., New York, NY.

For Arent Fox LLP, Defendant: Asari A.C. Aniagolu, Hunter T. Carter, LEAD ATTORNEYS, Arent Fox LLP(New York), New York, NY.

For Deloitte Touche Tohmatsu Services, Inc., Deloitte Touche Tohmatsu Limited, Defendants: G. Michael Bellinger, LEAD ATTORNEY, Arent Fox LLP, New York, NY.

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OPINION AND ORDER

KATHERINE POLK FAILLA, United States District Judge.

The instant motions are but the latest skirmishes in a protracted war between the present and former attorneys of an individual client over the apportionment of an escrowed fund for legal fees.[1] Current counsel, Plaintiff Ray Legal Consulting Group, commenced this action against former counsel, Stacey M. Gray, her law firm, and other individuals and entities that are alleged to have touched on the fee dispute (collectively, " Defendants" ). In the Complaint, Plaintiff claims that Defendants acted in concert to deprive Plaintiff of fees rightfully owed to it, and further claims that this conduct amounted to tortious interference with an economic advantage and/or a business relation, tortious interference with a contract, civil conspiracy, breach of the implied covenant of good faith and fair dealing, and breach of fiduciary duty.

For the most part, Plaintiff's obvious frustration with Defendants does not translate into viable causes of action. Plaintiff has failed to state a claim for all claims except its claim for tortious interference with a contract. For this reason, Defendants' motions to dismiss are granted as to all claims but that claim.

BACKGROUND[2]

A. The Parties' Relationships

1. The Representations of Caldwell by Gray and Ray

On November 11, 2012, Victor F. Caldwell (" Caldwell" ) retained Defendants Stacey M. Gray (" Gray" ) and Stacey M. Gray, P.C. (" Gray P.C." ) (collectively, the " Gray Defendants" ) to represent him in a dispute with his former employer, Defendants

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Deloitte Touche Tohmatsu Services, Inc. and Deloitte Touche Tohmatsu Limited (collectively, " Deloitte" ). ( See Compl. ¶ 16, Bellinger Decl., Ex. B). In aid of that representation, Caldwell and the Gray Defendants entered into an engagement agreement (the " Engagement Agreement" ). (Compl. ¶ 16). The Gray Defendants' representation of Caldwell was short-lived, however, and on December 21, 2011, Caldwell terminated the representation. ( Id. at ¶ 17). Plaintiff alleges that the bases for the termination included the Gray Defendants' incompetence, malpractice, breach of fiduciary duties, and general misconduct amounting to good cause. ( Id.).[3]

The Engagement Agreement detailed the compensation due to the Gray Defendants. Specifically, it indicated that Gray P.C. would " charge [Caldwell] for the legal fees incurred up to [the date of termination] and all expenses already incurred." (Compl. ¶ 18). The invoices Gray P.C. submitted to Caldwell for the period November 11, 2011, through December 12, 2011, show that Gray P.C. billed 20.452 hours of work at a rate of $500.00 per hour, and the invoices for the period December 13, 2011, through December 20, 2011, show that Gray P.C. billed 7.586 hours at that same rate. ( Id.). Plaintiff alleges that because Caldwell had paid a retainer of $3,500, Gray P.C. is due approximately $10,500 in attorneys' fees. ( See id. at ¶ ¶ 19-20). The Gray Defendants have not received payment for the legal services rendered.

Plaintiff represented Caldwell subsequent to the Gray Defendants' representation, during which time Caldwell settled his dispute with Deloitte. ( See Compl. ¶ 30; Bellinger Decl., Ex. B).

2. The Involvement of Deloitte and Arent Fox and the Confidentiality and Settlement Agreements

On December 21, 2011, the Gray Defendants sent a letter to Deloitte's former counsel, Sidley & Austin LLP, indicating that the Gray Defendants would " place a lien on Mr. Caldwell's file along with any settlements, awards and severance amounts that Deloitte pays to Mr. Caldwell," with respect to the dispute between Caldwell and Deloitte. ( See Compl. ¶ 21). Defendants Arnold E. DiJoseph, III (" DiJoseph" ) and Arnold E. DiJoseph, P.C. (" DiJoseph P.C." ) (collectively, the " DiJoseph Defendants" ), were retained by the Gray Defendants and supported their position in claiming a lien on Caldwell's file. ( See id. at ¶ 22). Indeed, Plaintiff alleges that the Gray Defendants and the DiJoseph Defendants " continued and increased their unlawful interference with false threats of a 'charging lien' and frivolous, costly litigation, causing [Deloitte] to breach the settlement agreement" between Caldwell and Deloitte. ( Id. at ¶ 22).

In support of this claim, Plaintiff points to a January 27, 2012 email from a partner at Deloitte's current counsel, Defendant Arent Fox LLP (" Arent Fox" ), who stated to Plaintiff:

[t]he only impediment [to settlement between Deloitte and Caldwell] is the Gray issue that [he was] trying to work through with [Deloitte]. I have endorsed the plan to NOTIFY Gray that her notice is flawed and that a settlement has been reached with Mr. Caldwell, and let Mr. Ray handle her. I await the client's view. The writing will be handled expeditiously; I need Gray out of the picture.

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( See id. at ¶ 23). As a result of the statements in this email, Caldwell and Plaintiff agreed to allow Gray to be notified, and Arent Fox contacted Gray to inform her of the settlement between Caldwell and Deloitte. ( See id. at ¶ 24). According to Plaintiff, at that point in the negotiations, the parties to the settlement had reached an agreement on the material terms that was itself sufficient to constitute an enforceable contract. ( Id. at ¶ 28). No written settlement agreement, however, had been executed.

On February 8, 2012, prior to any settlement agreement between Caldwell and Deloitte being executed, Arent Fox required that a confidentiality agreement be executed, pursuant to which a portion of the settlement funds for Caldwell would be placed in escrow. (Compl. ¶ 28). Arent Fox made clear that absent the execution of a confidentiality agreement, there would be no settlement between Caldwell and Deloitte. ( Id.). In order to facilitate the settlement, on February 10, 2012, Plaintiff, Arent Fox, and the DiJoseph Defendants entered into the confidentiality agreement requested by Arent Fox (the " Confidentiality Agreement" ). ( Id. at ¶ 29).

The Confidentiality Agreement stated that it was " made and entered into by and among" Plaintiff (representing Caldwell), DiJoseph (representing Gray), and Arent Fox (representing Deloitte). (Compl. ¶ 30). It further recited that Caldwell and Deloitte " have agreed to settle fully and finally all differences between them arising out of [Caldwell's] employment with, and separation from, Deloitte and that [Caldwell] and Deloitte have memorialized this agreement in a Settlement Agreement." (Bellinger Decl., Ex. C). It stated that the parties to it (i.e., Plaintiff, DiJoseph, and Arent Fox) had agreed " [t]hat counsels Ray and Gray have a dispute regarding legal fees for legal services purportedly rendered to Mr. Caldwell." (Compl. ¶ 31). With specific regard to that dispute, the parties agreed that:

Deloitte will place into an escrow account (the " Escrow Account" ) a sum certain which will constitute the total amount of attorneys' fees authorized pursuant to the Settlement Agreement. Counsel agrees not to seek any amount of legal fees in excess of that held in the Escrow Account. The apportionment of the fees between Ray and Gray will be determined either by binding arbitration or by a court of competent jurisdiction. No funds will be distributed from the Escrow Account until a final order is issued by a Court of competent jurisdiction or until Ray and Gray reach a binding settlement of their claims and have each notified Deloitte of such binding settlement.

(Bellinger Decl., Ex. C). The Confidentiality Agreement made clear that it was " binding upon Counsel," but did not indicate that it was binding upon their clients. ( See id.).

The settlement agreement referenced in the Confidentiality Agreement was then executed on April 17, 2012 (the " Settlement Agreement" ). The Settlement Agreement was " made and entered into by and between" Caldwell and Deloitte, and was also signed by Plaintiff. (Bellinger Decl., Ex. B). Similar to the Confidentiality Agreement, the Settlement Agreement provided:

Deloitte will deposit [a sum of money] into an escrow account for attorneys fees ... This sum will constitute the total amount of attorneys' fees authorized pursuant to the Settlement Agreement. [Plaintiff and Ray] agree[] not to seek any amount of legal fees in excess of that held in the Escrow Account. The apportionment of the fees held in the Escrow Account between [Plaintiff

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and Ray] and Stacey M. Gray, P.C. (" Gray" ) will be determined either by binding arbitration or a court of competent jurisdiction. No funds will be distributed from the Escrow Account until a final order is issued by a Court of competent jurisdiction or until [Plaintiff and Ray] and Gray reach a written binding settlement agreement of their claims and each has notified [Deloitte] in writing of such binding settlement.

(Bellinger Decl., Ex. B). Both the Confidentiality and Settlement Agreements provided that New York law would govern the agreements. ( Id. at Ex. B, C).

As of the date of this Opinion, the escrowed funds have not been released.

B. The Caldwell-Gray State Court Action and the Related Arbitration

On February 15, 2012, even before the settlement was finalized, Caldwell filed, with Plaintiff as his attorney, an action in New York Supreme Court, New York County, captioned Victor F. Caldwell v. Stacey M. Gray and Stacey M. Gray, P.C., Index No. 101658/2012 (N.Y. Sup. Ct., N.Y. Co. 2012) (the " Caldwell-Gray Action" ). Though nominally brought by Caldwell, the Caldwell-Gray Action was quite obviously designed to benefit Plaintiff; it was brought against the Gray Defendants in order to resolve the lien that they had asserted as to the attorneys' fees. (Compl. ¶ 39; Gray Decl., Ex. 2).

The DiJoseph Defendants represented the Gray Defendants in the Caldwell-Gray Action. ( See DiJoseph Decl., Ex. G). On March 13, 2012, the Gray Defendants filed a motion to dismiss, contending that the action should be dismissed in favor of arbitration pursuant to the Engagement Agreement. (Compl. ¶ 45).[4] On August 28, 2012, the New York State Supreme Court issued an order granting the motion to dismiss and ordering that Caldwell must " arbitrate the within fee dispute [with the Gray Defendants] in accordance with the engagement agreement." ( Id. at ¶ 49). In that opinion, the court also noted that the dispute between Caldwell and Plaintiff was " between attorneys and settlement is encouraged." (DiJoseph Decl., Ex. D (emphasis in original)).

On September 6, 2012, Caldwell, again using Plaintiff as counsel, filed a fee dispute with the Attorney Fee Dispute Resolution Program. (Compl. ¶ 50).[5] Here, too, Caldwell's involvement was nominal. Defendant Gray opposed the arbitration on the basis that the amount at issue exceeded the jurisdictional amount of $50,000. ( See id. at ¶ 51). Plaintiff alleges that, in the course of opposing the arbitration, the Gray and DiJoseph Defendants

falsely claim[ed] that they had a " charging lien" based upon " recent changes in Section 475 and 475-a of the [New York] Judiciary Law" ... for an amount in excess of the jurisdictional amount and that Caldwell " had absolutely no interest or ability to obtain any additional money from the Arbitration," based on his Settlement Agreement.

( Id.). Plaintiff further alleges that " [n]o reasonable attorney could have made such

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claims in good faith." ( Id. at ¶ 52).[6]

C. The Gray-Ray and Ray-Gray Federal Court Actions

Perhaps because of perceived bars to arbitration, the Gray Defendants brought an action on July 29, 2013, in New York State Supreme Court against Plaintiff, entitled Stacey M. Gray, P.C. v. Ray Legal Consulting Group, Index No. 156885/2013 (N.Y. Sup. Ct., N.Y. Co. 2013) (the " Gray-Ray Action" ). (Compl. ¶ 67). On September 9, 2013, Plaintiff removed the Gray-Ray Action to federal court; it was assigned to the undersigned, and captioned Stacey M. Gray v. Ray Legal Consulting Group, No. 13 Civ. 6336 (KPF). ( Id. at ¶ 71).

Two days after the Gray-Ray Action's removal, on September 11, 2013, Plaintiff submitted a pre-motion letter indicating its intention to move to dismiss the Gray Defendants' complaint. (Compl. ¶ 80). The next day, on September 12, 2013, the Gray Defendants voluntary withdrew their action pursuant to Federal Rule of Civil Procedure 41. ( Id. at ¶ 81).[7] When Plaintiff inquired as to why the Gray Defendants dismissed the action, counsel for the Gray Defendants stated that it was their " prerogative to do" so after the action was removed to federal court. ( Id. at ¶ 83).

On September 26, 2013, Plaintiff filed a mirror-image action of the Gray-Ray Action in federal court; it too was assigned to the undersigned, and is captioned Ray Legal Consulting Group v. Stacey M. Gray, et al., No. 13 Civ. 6866 (KPF) (the " Ray-Gray Action" ). (Ray Decl. ¶ 2). The Gray Defendants have moved to dismiss that action. ( Id. at ...


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