Woodcock v Birnbaum

Woodcock v Birnbaum2018 NY Slip Op 32841(U)

November 7, 2018Supreme Court, Kings CountyDocket Number: 507014/18Judge: Leon Ruchelsman

Cases posted with a "30000" identifier, i.e., 2013 NY SlipOp 30001(U), are republished from various New York

State and local government sources, including the NewYork State Unified Court System's eCourts Service.

This opinion is uncorrected and not selected for officialpublication.

FILED: KINGS COUNTY CLERK 11/09/2018 10:03 AM INDEX NO. 507014/2018

NYSCEF DOC. NO. 48 RECEIVED NYSCEF: 11/09/2018

1 of 11

' .

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS : CIVIL TERM : COMMERCIAL 8 20/oNQ, -9 - -------------------- - - - - - ----------------x A;r 7: 55 CHRISTIAN JOHN WOODCOCK, Individually and Derivatively ,

Plaintiff , Decision and ·order

- against - Index No . 507014/18

ROBBY H. BIRNBAUM AND GREENSPOON MARDER , LLP . ,

Defendants, November 7 , 2018

And

UNITED CREDIT SOLUTIONS , INC ., ------------------------------------------x PRESENT : HON . LEON RUCHELSMAN

The defendants Robby Birnbaum and Greenspoon Marder LLP have

moved seekinq to dismis s the complaint pursuant to CPLR §3211 on

various grounds. The plaintiff opposes the motion. Papers were

submitted by the parties and arguments held . After reviewing all

the arguments , this court now ma kes the fo llowing determination .

During the fall of 2011 the plaintiff and Ingo Nowottny

incorporated an entity called Century First Credit Solutions

lnc . , [hereinafter ' CFCS') and each was a fifty percent owner of

that entity . On December 22 , 20 11 Ingo Nowottny formed nominal

defendant United Credit Solutions , Inc . , [hereinafter ' UCS ' ) . On

March 1 , 2012 Woodcock purchased half the shares of UCS and thus

became equal shareholders in both corporat i ons . On November 6 ,

2014 Nowottny ' s sister formed another entity, the similarly

called United Credit Solvers , Inc ., and then entered into an

agreement to purchase some of the assets and book of business of

UCS . The relationship between Nowottny and Woodcock soured and

[* 1]



2 of 11

Woodcock formed another entity Named Priority Capital LLC to

compete with Nowottny without Nowottny ' s ownership interests .

Indeed, both Nowottny and Woodcock accused the other of stealing

proprietary information from their joint corporations and

utilizing the information in their wholly owned corporations .

First , on August 25 , 2015 Woodcock through counsel sent Nowottny

a cease and desist letter accusing Nowottny of representing to

clients that United Credit Solvers is really UCS and demanding

Nowottny discontinue this activity. A few days later a lawsuit

was filed in an action entitled Century First Credit Solutions

Inc. , v . Priority Capital LLC , Christian Woodcock and Joh n Amato ,

Index Number 653287/2015 in New York County . In that action , the

plaintiff Century First Credit Solutions Inc . , owned by Nowottny,

sued Woodcock, alleging he misappropriated trade secrets ,

converted corporate funds and tortuously interfered with

contractual relations , among other claims . Spec i fically , the

complaint alleged Woodcock and John Amato , a former sales

representative and independ~nt contractor of CFCS , formed

Priority Capital LLC and utilized the information misappropriated

in the new entity . Woodcock filed a third party complaint

against Nowottny and his brother William Nowottny alleging they

interfered with Priority and actually fraudulently represented

themselves as employees of Priority to steal Priority' s business

for their own businesses .

2

[* 2]



3 of 11

In that lawsuit while the third party complaint was dismissed

the court held in an order dated January 25, 2017 that Greenspoon

Marder LLP [hereinafter 'GM' ) was disqualified from representing

CFCS . The court noted that Woodcock established that GM

" personally represented him both previous ly and currently , and

thus represents him individual l y in addition to in his capacity

as a 50% shareholder in both Century and Solutions" (see ,

Decision of Justice Bannon , dated January 25 , 2017). The court

concluded that Woodcock established he maintained an attorney

client relationship with GM, that his relationship with GM was

substantiall y related to the lawsuit between Century and Priority

and that such interests are materially adverse . The court

disqualified GM ' s representation in the underlying lawsuit on the

grounds such representation was "rife with conflict" (id) .

Woodcock instituted the within lawsuit alleging four causes

of action . The first two allegations are that GM and Robbie

Birnbaum, the GM attorney who dealt with Woodcock , breached their

fiduciary duties and duties of loyalty to Woodock derivatively

and Woodcock personally . The third and fourth causes of action

allege GM and Birnbaum violated Judiciary Law §487 to Woodcock

derivatively a nd personally .

The defendants have moved seeking to dismi ss the lawsuit .

First, Birnbaum argues that he has no connection with the State

of New York sufficient for the court to assert any personal

3

[* 3]



4 of 11

jurisdiction over him . Substantively, the motion argues the

complaint has failed to establish the necessary elements

sufficient to state any cause of action.

Conclusions of Law

A non-domiciliary may be subject to the jurisdiction of New

York courts where that individual "transacts any business within

the state or contracts anywhere to supply goods or services in

the state" (CPLR §302(a)) . "Although it is impossible to

precisely fix those acts that constitute a transaction of

business" case law has established that "it is the quality of the

defenda~ts' New York contacts that is the primary consideration"

(see , Fischbarg v . Doucet , 9 NY3d 375 , 849 NYS2d 501 [2007)) .

Thus , it is generally true that electronic mail or telephone

communications , actions undertaken by Birnbaum in this case , are

gene r ally insufficient to constitute ' transacting business '

sufficient to confer jurisdiction (Dukes Bridg e LLC v. Security

Life of Denver Insurance Company, 2016 WL 1700383 [E . D. N. Y.

2016]) . However , in Cutco industries Inc., v . Naughton , 806 F2d

361 [2d Cir. 1986) the court held that individuals that comprise

a partnership or a joint venture are agents of each other.

Therefore , jurisdiction upon Birnbaum would be proper if it can

be established that GM acted as his agent in New York. Thus ,

Birnbaum can be ~aid to have transacted business in New York

4

[* 4]



5 of 11

through partners hip activities in New York \see , Durkin v . Shea ,

957 F . Supp 1 3 60 [S . D. N. Y. 1 997]) . In this case, the init i al

letter of engagement sent by Birnba um to UCS dated April 29 , 2 013

was wr itten on GM letterhead . Further , the letter confirmed "the

engagement of Greenspoon Marder , P . A." and Birnbaum signed the

letter " for the Firm" (see , Letter of Engagement) . Thus , while

Birnbaum migh t have acted in Florida , there can be no dispute

that he did not act in an ind ividual capacity but as a member of

GM . The parties have not presented any evidence how Woodcock or

Nowottny , for that matter , came to learn of GM or Birnbaum and

whether any solic i tation was conducte d by GM in New York

sufficient to subject Birnbaum a s agent of GM to New York courts .

Similarly, the Letter of Engagement mentions bill ing information ,

hourly rates , and monthly invoices . The mot ion papers do not

reveal whether such information was presen ted to the client by GM

from a New York office or some other state. Further , t here has

been no evidence presented that no other attorneys from GM

conducted any work for any of the parties who wer e present in New

York . Thus , there are significant factual questions whether

Birnbaum can have reasonably expect ed to be subject to New York

courts and consequently the motion seeking to di s miss the

complaint for lack of jurisdiction is denied .

Turning to t he substantive grounds seeking to dismiss the

complaint , it is well settled that "[a] motion to dismiss made

5

[* 5]



6 of 11

pursuant. to CPLR §32ll[a] (7) wil l fail i f , taking all facts

alleged a s true and according them every possible inference

favorable to the p l aint if f , the complaint states in some

r e cognizable form any cause of action known to our law" (see ,

e . g . AG Capital Funding Partners , LP v . State St. Bank and Trust

Co ., 5 NY3d 582 , 808 NYS2d 573 (2005) , Leon v. Martinez , 84 NY2d

83, 614 NYS2d 972 , (1 994) , Hayes v . Wilson, 25 AD3d 586 , 807

NYS2d 567 [2d Dept., 2006) , Ma rchionni v . Drexler , 22 AD3d 814 ,

803 NYS2d 196 [2d Dept ., 2005) . Whether the complaint will late r

survive a motion for summary j udgment , or whether the plaint iff

will ultimately be able to prove it s c l aims , of course , p lays no

part in the determi nation of a p re - discovery CPLR § 321 1 mot i on to

dismiss (see , EBC I , Inc . v . Goldman Sachs & Co ., 5 NY3d 11 , 799

NYS2d 170 [2005)) .

First , Business Cor poration Law §62 6 (c) states that no

derivat i ve lawsuit may be corrunenced unless the c omplaint a lleges

" with particularity the efforts of the plaint iff to secure the

initiation of such act ion by the board or the reasons for no t

making the effort" (id) . As the Supreme Court noted , for a

stockholder to sue derivat ively " he m~st ma ke an earnest , not a

simulated effort , with the ma naging body o f the corporation , to

induce remedial action o n thei r part , and this must be made

apparent to the court " (s ee , Hawes v . City of Oakland, 104 US

450 , 14 Otto 450 (188 1 )) .

6

[* 6]



7 of 11

The defendants argue the plaintiff failed to comply with

that provision and that consequently the p l aintiff has no

standing to pursue the lawsuit. The plaintiff counters that

specific evidence such notice would have been futile has been

presented .

To succeed upon an assertion that notice would have been

futile and hence not required, specific facts must be presented

that the individuals at issue were self-interested in the

transactions (see, Bansbach v . Zinn, 1 NY3d 1 , 769 NYS2d 175

[2003]. Thus , the plaintiff must establish that if a demand

would have been filed with the Board of Directors they could not

have exercised independent and disinterested business judgement

(id) . Thus, the individual defendants wil l be considered

incapable of being disinterested if facts support a personal

benefit to them regarding the transaction being challenged (id).

In that instance the business judgement rule is inapplicable and

demand futility is established .

In this case, the complaint alleges that defendants had

material interests in the issues that comprise the causes of

action , namely the representation of Binrbaum and GM . Thus ,

demand would obviously have been futile .

The defendants argue the standard for demand futility has

not been met since the futility has not been presented with

sufficient particularity . However, particularity governs the

7

[* 7]



8 of 11

totality of the futility and as long as such fut ility can be

discerned by the court then the particularity will naturally

suffice . Thus , where the directors are accused of self-dealing

then obviously futility has been presented (see , Soho Snacks

Inc ., v. Franq ioudakis , 129 AD3d 636, 13 NYS3d 31 [1st Dept. ,

2015)). While Nowottny has been directly accused of self dealing

the e nt ire lawsuit presented here conflicts directly with

activities undertaken by Nowottny , most notably his hiring of GM

in the New York lawsuit . Thus , demand futility has been

established .

To succeed on a claim for breach of a fiduciary duty, a

plaintiff must establish the existence of the following th~ee

elements : (1) a fiduciary relationship existed between plaintiff

and defendant , (2) misconduct by the defendant, and (3) damages

that were directly caused by the defendant's misconduct (Kurtzman

v Bergstol , 40 AD3d 588 , 835 NYS2d 644 , 646 [2d Dept ., 2007) ,

see, Birnbaum v . Birnbaum, 73 NY2d 461 , 541 NYS2d 746 [1989)

stating individuals jointly managing a limited liability

corporation creates a fiduciary duty among the members analogous

to that of partners) .

It is well settled ~hat the violation of a Disciplinary Rule

does not , by itself, give rise to a claim of breach of a

fiduciary duty (Schwartz v . Olshan Grudrnan Frome & Rosenzweig,

302 AD2d 193 , 753 NYS2d 482 [1st Dept ., 2003)). Therefore, the

8

[* 8]



9 of 11

allegations of the complaint must be examined . The complaint

alleges var ious breaches of fiduciary duties including " advising

in the misuse , misappropriatiqn , removal and/or destruction of

UCS assets and property" (see , Summons and Complaint , ~ 114(b)) .

Of course , the plaintiff will be required to prove these

allegations at trial , however , at this stage of the proceedings ,

accepting the allegat i ons of the complaint as true , they allege

breaches of duty s ufficient to survive a motion to dismiss , based

upon ot~er allegations besides the breach of any disciplinary

rules (see , Summons and Compla int , ~ 114(a)) . For similar

reasons the requisite causation required to plead and prove a

breach of fiduciary duty is satisfied . The plaintiff has alleged

that if GM would not have committed the various breaches

enumerated above and in the complaint then the plaintiff would

not have been harmed in the manner in which he was harmed. The

specific harms could include compensatory damages or perhaps

forfe i ture of legal fees . Again , while the plaintiff will be

required to prove those losses and harms , at this stage a prima

facie presentation of a breach of duty has been made.

Consequently , the motions seeking to dismiss the breach of

fiduciary duty claims are denied.

Lastly , concerning Judiciary Law §487, it is well settled

that to establish such a cause of action the plaintiff must

present evidence an attorney acted " with intent to deceive"

9

[* 9]



10 of 11

either the court or any party (see, Moormann v. Perini Hoerger,

65 AD3d 1106, 886 NYS2d 49 [2d Dept . , 2009]). The allegations

concerning the deception must be pled with particularity (Betz v .

Blatt, 160 AD3d 696 , 74 NYS3d 75 [2d Dept ., 2018]).

First , it must be noted that the Second Department no longer

mainta ins a cause of action pursuant to Judiciary Law §487 based

upon an attorney's egregious , extreme or chronic delinquent

activities . Rather, "the only liability standard recognized in

Judiciary Law §487 is that of an intent to deceive" (Dupree v .

Vorhees , 102 AD3d 912 , 959 NYS2d 235 [2d Dept. , 2013]) .

Second , considering the intent to deceive, such intent can

hardly be demonstrated . Indeed , GM acknowledged to the court as

well as to the plaintiff that such representation was being

undertaken . In Judge Bannon ' s decision dated January 25 , 2017,

she noted that in opposition to the motion to disqualify the

plaintiff there, CFCS argued that "Woodcock is only a former

client of Greenspoon Marder, that any representation of Woodcock

in Florida was only provided in connection with Woodcock role as

a 50% owner of Century , that personal representation of Woodcock

by Greenspoon Marder in Florida , if any, was not substantially

related to the instant matter" (supra). Thus , GM ' s

representation in the New York matter was not ' deceptive ' in any

manner, rather, GM simply argued the representation was not

legally proscribed. While they failed to prevail upon such

10

[* 10]



11 of 11

argument , which comprises the causes of action as noted, they did

not engage in any decept ion or any deceptive practices .

Therefore , the motions seeking to dismiss t he claims based upon

Judiciary Law §487 are hereby granted .

So ordered.

DATE D: November 7 , 2018 Brooklyn N. Y.

ENTER :

11

Hon . Leon Ruchelsman JSC

I ~

( Jl Q"'\

[* 11]

Woodcock v Birnbaum

Documents

Transcript of Woodcock v Birnbaum