October 25, 2017
Sometimes victories come when you least expect them – but also when they are most welcome. We were preparing to go to a jury trial next month to defend our clients against what we viewed as baseless accusations of fraud and breach of fiduciary duty. The trial was supposed to last for two weeks. The plaintiff was seeking at least $20 million. We had moved to dismiss the case on legal grounds – more on this below -- but the judge had advised it was unlikely the motion would be decided before the trial. Late in the afternoon on Friday October 13, though, the judge granted the motion – much to our delight and relief. And so, after a long and winding road through the courts, our clients are now in the clear (subject to appeal, of course).
The story has a sizable cast of characters and a somewhat winding plot, so I’ll spare you the details. Basically, in May 2006, one of my clients bought a 50% interest in a company that owned a small office building in Manhattan. He paid just under $6 million for the half-interest. The seller was his father-in-law’s lifelong friend and business partner (the father-in-law’s estate is my other client). The seller was represented by an attorney, who was also a lifelong friend of the seller. In February 2007 – eight months later – my clients entered into a contract to sell the building for $32 million.
After his father died in January 2007, the seller’s son learned about the sale and apparently concluded that the only possible explanation for the price disparity was that my clients and his father’s attorney had together defrauded his father. As a result, he spent much of the next eleven years pursuing claims against my clients and the attorney – first in more than three years of disputes with his mother in Surrogate’s Court, and then, starting at the end of 2010, in a lawsuit against my clients and the attorney – actually, their estates: other than the buyer, the others had died by that time.
At the end of discovery, the attorney’s estate moved for summary judgment. The judge granted the motion, and in September 2016 the Appellate Division affirmed. Once we got the Appellate Division decision it was clear to us that the claims against our clients were no longer valid. The legal reasoning is a bit intricate, but basically it goes like this: if the attorney knew all the true facts – which is what the son was claiming – then that means the seller’s attorney was fully informed but the seller went ahead with the transaction anyway.
This much was clear to us, but we needed to get the judge to agree with us. We moved to dismiss the case earlier this year. But in the meantime the judge fixed a trial date. We were supposed to start picking a jury next month. Because we hadn’t gotten a ruling on the motion we were furiously preparing for a two-week jury trial.
Late in the afternoon on Friday, October 13, an email arrived from the court that said an order was entered in the case. When I clicked on the link, I found it was a decision on our motion to dismiss. With just six weeks to go until trial, and after almost seven years of litigation, the judge dismissed the case – so we won a complete victory on papers, without having to call a single witness.
Needless to say, we and our clients are very happy with the result. The plaintiff may yet appeal – we’ll know within the next month or so – but for now we’re celebrating.
If you have any questions about this case, or would like to see the judge’s decision – it’s only eleven double-spaced pages – please feel free to contact me via email at sriback@wilkauslander.com or by telephone at (212) 981-2326.