| Masson v Wiggins & Masson, LLP |
| 2013 NY Slip Op 07099 [110 AD3d 1402] |
| October 31, 2013 |
| Appellate Division, Third Department |
| Robin Abrahamson Masson,Respondent, v Wiggins & Masson, LLP, et al., Defendants, and Wiggins &Kopko, LLP, Appellant. |
—[*1] True & Walsh, LLP, Ithaca (Peter J. Walsh of counsel), for respondent.
Stein, J. Appeals (1) from an order of the Supreme Court (Cerio Jr., J.), enteredNovember 30, 2011 in Tompkins County, which, among other things, granted plaintiff'smotion for partial summary judgment declaring that plaintiff's share of certaincontingency fees shall be calculated pursuant to a partnership agreement betweenplaintiff, defendant Walter J. Wiggins and Erin McKinley, (2) from an order of saidcourt, entered May 9, 2012 in Tompkins County, which, upon reargument, among otherthings, granted plaintiff's motion for partial summary judgment on the first, third andfourth causes of action, (3) from an order of said court, entered September 18, 2012 inTompkins County, which quantified the damage award due to plaintiff, and (4) from thejudgment entered thereon.
These appeals involve a dispute between former law partners over the distribution oflegal fees. Plaintiff and defendant Walter J. Wiggins, together with a third attorney, ErinMcKinley, were partners of defendant Wiggins & Masson, LLP (hereinafter W&M). Awritten partnership agreement established the terms of the partnership and, in particular,delineated how W&M would make payments to any withdrawing partner for legal feesthat it received for services rendered in contingent fee matters that were pending whenthe partner withdrew. After [*2]McKinley withdrew fromW&M, the W&M partnership agreement was amended (hereinafter the W&Mpartnership agreement) to reflect the addition of a new partner, Jason Crane, and the lawfirm's name was changed to Wiggins, Masson & Crane, LLP. Shortly thereafter, plaintiffwithdrew from the partnership.
In January 2007, Wiggins and Crane entered into a partnership with attorney EdwardKopko, forming Wiggins, Kopko & Crane, LLP. Upon Crane's subsequent withdrawalfrom the firm, the two remaining partners ultimately formed defendant Wiggins &Kopko, LLP (hereinafter defendant) by written agreement effective November 17, 2006(hereinafter defendant's partnership agreement), the same date that plaintiff withdrewfrom W&M.[FN1]During its existence, defendant made various payments to plaintiff for her share of feesgenerated in cases that were pending when she was a partner in W&M, in accordancewith the W&M partnership agreement. Nonetheless, a dispute later arose among plaintiff,Wiggins and Kopko regarding how those fees should be computed and by whom theywere to be paid. As a result, plaintiff commenced this action in December 2010 againstdefendant, W&M and Wiggins, individually.[FN2]Defendant served an amended answer with counterclaims against plaintiff for unjustenrichment and fraud, as well as cross claims against Wiggins for fraud, breach offiduciary duty, conversion, indemnification and contribution, and fraudulentconcealment.[FN3]
After the exchange of discovery, plaintiff moved for, among other things, partialsummary judgment against defendant and Wiggins, individually. Defendant opposed themotion and cross-moved to dismiss plaintiff's complaint pursuant to CPLR3211[FN4]or, alternatively, for summary judgment dismissing the complaint. Defendant alsomoved, as relevant here, for [*3]summary judgment on itscounterclaims against plaintiff. In a November 2011 order, Supreme Court concludedthat the W&M partnership agreement required arbitration of all disputes arising underthat agreement and, therefore, granted defendant's cross motion for summary judgmentdismissing plaintiff's first, third and fourth causes of action. On the other hand, SupremeCourt granted plaintiff's motion for partial summary judgment on her second cause ofaction, declaring that plaintiff's share of all contingency fees received by W&M, Wigginsor defendant must be calculated according to the W&M partnership agreement. The courtfurther determined, among other things, that the arbitration provision in defendant'spartnership agreement required denial of defendant's motion for summary judgment withrespect to its counterclaims against plaintiff.
Plaintiff and defendant subsequently moved to reargue the November 2011 order. Ina May 2012 order, Supreme Court found that defendant had waived its right to insist thatplaintiff arbitrate her claims, concluded that plaintiff was entitled to fees in certainidentified cases in accordance with the W&M partnership agreement and granted partialsummary judgment in plaintiff's favor on the first, third and fourth causes of action. In sodoing, the court denied defendant's cross motion in its entirety. In addition to other reliefnot relevant here, the court also granted plaintiff's motion for leave to serve an amendedverified complaint to name Kopko, individually, as a defendant.[FN5]
Finally, in a September 2012 order, Supreme Court accepted a report submitted by anindependent accountant pursuant to the W&M partnership agreement which calculatedthe fees to which plaintiff was entitled; the court subsequently issued a judgment inplaintiff's favor in accordance with that order. Defendant now appeals from all threeaforementioned orders and from the judgment.[FN6]
We affirm. We turn first to Supreme Court's award of partial summary judgment toplaintiff. As argued by the parties, this issue revolves around whether plaintiff is acreditor of defendant and/or whether defendant was a successor partnership to W&M andliable for obligations to plaintiff pursuant to the W&M partnership agreement. In supportof her motion, plaintiff submitted an attorney's affidavit with exhibits that included,among other things, a copy of the complaint, the proposed amended complaint, andvarious documents demonstrating payments made to plaintiff by defendant in accordancewith the W&M partnership agreement after she withdrew from W&M.[FN7]Notwithstanding Kopko's denial of any knowledge of or consent to the payments made toplaintiff from defendant's business accounts—allegedly at Wiggins'instruction—and his claim that defendant is not bound by Wiggins' actions in thisregard, it is undisputed that Wiggins, as a partner, approved such payments, whichimputed knowledge thereof to [*4]defendant (seePartnership Law § 23).
In any event, Supreme Court did not rely upon the payments reflected in the subjectbusiness records as a basis for granting partial summary judgment in plaintiff's favor.Instead, Supreme Court found—correctly, in our view—that defendant, as asuccessor to Wiggins, Masson & Crane, LLP, was either a continuation of W&M or anassignee thereof as to those cases inherited from W&M and, as such, was responsible forpayments due to plaintiff pursuant to the W&M partnership agreement.
Here, the W&M partnership agreement expressly provided that the withdrawal of apartner would not cause a dissolution of the partnership (accord Rotenberg vChamberlain, D'Amanda, Oppenheimer & Greenfield, 248 AD2d 1021, 1022[1998]). Therefore, the partnership continued after plaintiff withdrew therefrom. Further,the record before us includes certain corporation records of the Department of State,which reveal that defendant is the same legal entity as W&M with a new name. Inaddition, Kopko stated in a 2008 letter to plaintiff that "[t]he partnership formerly knownas 'Wiggins & Masson, LLP' continued as the same partnership entity under the newname of 'Wiggins & Kopko, LLP.' " Similarly, an affidavit submitted by Wigginsindicates that defendant "took over where [W&M] left off."[FN8]Consequently, Supreme Court correctly determined that W&M ultimately continued tooperate as defendant, its successor.[FN9]
In support of its position that it bears no financial responsibility to plaintiff,defendant primarily relies upon the terms of its own partnership agreement, whichprovides, in relevant part, that defendant would only be "liable for the reasonable andnecessary debts of the firm incurred after November 17, 2006 and not for the debts ofany prior law practice with which Wiggins and Kopko were formerly associated."However, inasmuch it was established as a matter of law that defendant is the successorentity of W&M, Supreme Court correctly determined that defendant's partnershipagreement cannot defeat its liability to plaintiff for those fees generated by defendant forclients and business matters it continued from W&M, as Kopko and Wiggins cannotcontract with each other to avoid liability of the partnership to a nonparty to theiragreement (see generally Partnership Law § 72). In our view, Kopko'sargument that he is not bound by the W&M partnership agreement because he was notmade aware of such agreement is more appropriately addressed in connection with hiscross claims against Wiggins.
Based upon the foregoing, Supreme Court properly declared that the W&Mpartnership agreement controlled the calculation of plaintiff's share of the applicable feesand determined that plaintiff was entitled to judgment as a matter of law. Defendant'smotion to dismiss the complaint, which was premised upon the claim that defendant'spartnership agreement was [*5]controlling, was alsoproperly dismissed.
We turn next to defendant's assertion that plaintiff was required to arbitrate herclaims. Initially, we note that both plaintiff and Wiggins unquestionably waivedarbitration (see Stark v MolodSpitz DeSantis & Stark, P.C., 9 NY3d 59, 66 [2007]; see also Sherrill vGrayco Bldrs., 64 NY2d 261, 272 [1985]).[FN10]Further, while defendant asserted the contractual arbitration provision as an affirmativedefense in its answer, it did not move to stay the action and compel arbitration(see CPLR 7503 [a]). Instead, it aggressively participated in the discoveryprocess and received the benefit of extensive discovery from plaintiff, which would nototherwise have been available in arbitration (see De Sapio v Kohlmeyer, 35NY2d 402, 406 [1974]). In doing so, defendant's acceptance of the judicial forum"manifested a preference 'clearly inconsistent with . . . [a] claim that theparties were obligated to settle their differences by arbitration' " (Sherrill v GraycoBldrs., 64 NY2d at 272, quoting Matter of Zimmerman [Cohen], 236 NY 15,19 [1923]; see Matter ofWaldman v Mosdos Bobov, Inc., 72 AD3d 983, 983-984 [2010], lvdenied 15 NY3d 715 [2010]; accord Stark v Molod Spitz DeSantis & Stark,P.C., 9 NY3d at 66). Thus, we agree with Supreme Court's determination thatdefendant's actions resulted in a waiver of its right to compel arbitration pursuant to theW&M partnership agreement.
Finally, we decline to disturb that part of Supreme Court's order granting plaintiffleave to file an amended complaint to assert a cause of action against Kopko,individually. Inasmuch as the proposed amendment was not plainly without merit and didnot cause undue prejudice or surprise, Supreme Court properly exercised its discretion ingranting plaintiff's motion (seeMatter of Greece Town Mall, L.P. v New York State, 105 AD3d 1298,1299-1300 [2013]; VermontMut. Ins. Co. v Mowery Constr., Inc., 96 AD3d 1218, 1219 [2012]; see also Vectron Intl., Inc. vCorning Oak Holding, Inc., 106 AD3d 1164, 1168 [2013]).
Defendant's remaining contentions have been considered and found to be lacking inmerit.
Peters, P.J., McCarthy and Spain, JJ., concur. Ordered that the orders and judgmentare affirmed, with costs.
Footnote 1: According to therecords of the Department of State, the partnership's name changed from Wiggins &Masson, LLP to Wiggins, Masson & Crane, LLP in 2006, to Wiggins, Kopko & Crane,LLP in January 2007 and then to Wiggins & Kopko, LLP in December 2007.
Footnote 2: Plaintiff's causes ofaction seek the following relief: (1) recovery of fees owed to plaintiff by Wiggins, W&Mand defendant; (2) a declaration against each defendant that plaintiff's share ofcontingency fees received by defendants arising out of certain matters must be calculatedin accordance with the W&M partnership agreement; (3) an accounting with respect toall fees received by defendants arising out of such matters and for a judgment on sumsdetermined to be due; and (4) a declaration that plaintiff is entitled to an accounting andpayment for all sums yet to become due under the W&M partnership agreement.
Footnote 3: Wiggins also answeredand asserted a cross claim against defendant for a determination that defendant wasobligated to pay plaintiff for her share of any fees received by defendant for matters thatwere pending when plaintiff withdrew from W&M.
Footnote 4: Defendant moved todismiss based on documentary evidence, the statute of frauds and failure to state a causeof action (see CPLR 3211 [a] [1], [5], [7]).
Footnote 5: The proposed cause ofaction against Kopko sought damages based upon theories of a constructive trust andunjust enrichment, stemming from the draws he received from defendant.
Footnote 6: Wiggins also filed anotice of appeal from the September 2012 order and judgment, but later withdrew saidappeal.
Footnote 7: Defendant paid plaintiffapproximately $17,000 in fees after she withdrew from the partnership. In turn, plaintiffalso paid defendant for its share of payments she received from former W&M clients.
Footnote 8: In his answer to thecomplaint, Wiggins also admitted certain allegations, including that defendant "acceptedthe Pending Matters subject to the obligations to account and to pay [plaintiff] for allPending Matters pursuant to . . . the [W&M] partnership agreement" andthat defendant "is the successor by merger to [W&M]."
Footnote 9: Defendant's counselessentially conceded at oral argument that defendant is a successor to W&M.
Footnote 10: Among other things,Wiggins did not raise an obligation to arbitrate in his answer nor did he move to compelarbitration or claim that plaintiff was required to arbitrate her dispute in his opposition tothe instant motions.