This matter comes before the Court on the motion to dismiss filed by Defendants Michael Einbinder and Einbinder & Dunn, LLP ("E & D") (collectively "Defendants"). Defendants seek dismissal of Plaintiffs Bayit Care Corp. ("Bayit") and Shabsi Schreier's ("Schreier") (collectively "Plaintiffs") one-count Amended Complaint solely as to Plaintiff Schreier, pursuant to CPLR 3211(a)(1) and (a)(7). For the reasons that follow, Defendants' motion is denied.

I.Background ^[FN1]

Plaintiff Bayit is a corporation that provided healthcare services. Plaintiff Schreier is the 50% co-owner of Bayit, as well as its president and on-site manager. Defendant E & D is a law firm practicing, among other things, franchise law. Defendant Einbinder is an attorney at E & D.

As part of its business, Bayit had previously entered into a franchise agreement whereby Bayit, as franchisee, managed a healthcare center and paid the cost of [*2]administrative personnel. (Defs.' Order to Show Cause, Exhibit F ¶ 6.) The franchisor employed and paid the healthcare personnel, and coordinated billing and collection from customers of the center. (Id., Exhibit F ¶ 6.)

The instant litigation stems from the alleged failure of E & D and Einbinder to take certain actions with respect to the renewal of the Plaintiffs' franchise. In 2009, a dispute arose as a result of the imposition of certain business decisions by the franchisor on Bayit. (Am. Compl. ¶ 21.) Defendants were retained by Bayit and, according to the Amended Complaint, Schreier, in connection with this dispute. (Id. ¶ 19.) From January 2010 to June 2011, a total of three retainer agreements were executed between Plaintiffs and Defendants. (Id. ¶ 19.)

Following settlement discussions between the franchisor and Plaintiffs, on the advice of Einbinder, Plaintiffs commenced a lawsuit against the franchisor, rather than either renewing the franchise or accepting one of the buyout or termination offers made by the franchisor. (Id. ¶¶ 40-48.) According to Plaintiffs, Defendants likewise failed to advise them of the requirements for renewal of the franchise. (Id. ¶¶ 47, 87-89.) Defendants also advised Schreier to reject an offer to enter into a consulting agreement with the franchisor, which would have provided Schreier with up to $800,000 in income over a five-year period. (Id. ¶¶ 9, 43.) Plaintiffs maintain that Defendants knew or should have known that Plaintiffs wanted to renew the franchise and that the franchise had monetary value to the Plaintiffs, and that Defendants took no action to renew the franchise until after the deadline for doing so had passed. (Id. ¶¶ 79-80.)

Plaintiffs assert one claim for legal malpractice in the Amended Complaint. Now before the Court is Defendants' motion to dismiss the Amended Complaint solely as to Plaintiff Schreier, pursuant to CPLR 3211(a)(1) and (a)(7), each of which will be discussed below in turn.

II.Analysis

A.Motion to Dismiss Standard

On a motion to dismiss for failure to state a cause of action, the court must accept each and every allegation as true and liberally construe the allegations in the light most favorable to the pleading party. Guggenheimer v. Ginzburg, 43 NY2d 268, 275 (1977); see CPLR 3211(a)(7). "We . . . determine only whether the facts as alleged fit within any cognizable legal theory." Leon v. Martinez, 84 NY2d 83, 87-88 (1994). A motion to dismiss must be denied, "if from the pleadings' four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law." 511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 NY2d 144, 152 (2002) (internal quotation marks and citations omitted).

On the other hand, while factual allegations contained in a complaint should be accorded a favorable inference, bare legal conclusions and inherently incredible facts are not entitled to preferential consideration. Sud v. Sud, 211 AD2d 423, 424 (1st Dep't [*3]1995).

Moreover, where the motion to dismiss is based on documentary evidence (CPLR 3211(a)(1)), the claim will be dismissed "if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law." Leon v. Martinez, 84 NY2d at 88; see also 150 Broadway NY Assoc., L.P. v. Bodner, 14 AD3d 1, 5 (1st Dep't 2004). Where, as here, the defendants have presented documentary evidence, the court is required to determine "whether the proponent of the pleading has a cause of action, not whether he has stated one." Ark Bryant Park Corp. v. Bryant Park Restoration Corp., 285 AD2d 143, 150 (1st Dep't 2001) (internal quotation mark and citation omitted).

B.Legal Malpractice

The sole cause of action for legal malpractice asserted in the Amended Complaint centers on Defendants' alleged failure to take certain actions with respect to the renewal of the Plaintiffs' franchise. Defendants move to dismiss the Amended Complaint solely as to Schreier, pursuant to CPLR 3211(a)(1) and (a)(7).

1.Failure to State a Cause of Action

With respect to CPLR 3211(a)(7), Defendants argue that the Amended Complaint fails to state a cause of action for legal malpractice because there was no privity between Schreier and Defendants, and, thus, Schreier lacks standing to bring a claim for legal malpractice against Defendants. Specifically, Defendants argue that only Bayit, not Schreier, retained Defendants. Defendants further argue that Schreier also was not a third-party beneficiary of the retainer agreements, and therefore lacks standing to assert a legal malpractice claim against Defendants.

"To recover damages for legal malpractice, a plaintiff must prove, inter alia, the existence of an attorney-client relationship." Gallet Dreyer & Berkey, LLP v. Basile, 2013 WL 361149, at *1 (Sup. Ct. NY County Jan. 16, 2013) (citation omitted). As the First Department has explained, "a claim for legal malpractice . . . . would fail to state a cause of action in the absence of an attorney-client relationship." Learning Annex, L.P. v. Blank Rome LLP, 106 AD3d 663, 663 (1st Dep't 2013) (citations omitted); see Fortress Credit Corp. v. Dechert LLP, 89 AD3d 615, 616 (1st Dep't 2011) (finding that a "legal malpractice cause of action fails because the parties had no attorney-client relationship"). Courts have held that where a plaintiff does not allege the existence of an attorney-client relationship, dismissal of a claim for legal malpractice is appropriate. See, e.g., Weiss v. Manfredi, 83 NY2d 974, 977 (1994) (citations omitted).

"It is well settled that a corporation's attorney represents the corporate entity, not its shareholders or employees." Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 NY3d 553, 562 (2009) (citations omitted). As the First Department has observed, "[a] lawyer's representation of a business entity does not render the law firm counsel to an [*4]individual partner, officer, director or shareholder unless the law firm assumed an affirmative duty to represent that individual." Campbell v. McKeon, 75 AD3d 479, 480-81 (1st Dep't 2010). That is, "[u]nless the parties have expressly agreed otherwise in the circumstances of a particular matter, a lawyer for a corporation represents the corporation, not its employees." Talvy v. American Red Cross, 205 AD2d 143, 149 (1st Dep't 1994), aff'd, 87 NY2d 826 (1995).

In this case, the record is unclear as to whether there was such an express agreement given the manner in which the retainer agreements were drafted. Each of the retainer agreements was addressed to Schreier personally, care of his business address at Bayit. (Am. Compl. ¶ 24.) " [T]he addition of a care of line . . . merely adds a person at that address who may claim the mail.'" Matter of Informart New York LLC v. Hugh O'Kane Elec. Co. LLC, 2003 WL 26094732, at *1 (Sup. Ct. NY County Jan. 6, 2003) (quoting Hoffenberg v. Commissioner, 905 F.2d 665, 666 (2d Cir. 1990)). See Russell & Annis v. Livingston & Wells, 16 NY 515, 518 (1858) (explaining that "[o]rdinarily, the address of a package to the care of any one is an authority to the carrier to deliver it to such person").

Moreover, the retainer letters do not clearly identify Bayit as the client. (Am. Compl. ¶ 25.) To the contrary, the January 11, 2010 retainer letter begins, "Dear Mr. Schreier: This retainer letter is intended to express our mutual understanding regarding our legal representation of you." (Defs.' Order to Show Cause, Exhibit C, at 1.) Similarly, the June 13, 2011 retainer letter begins, "Dear Shabsi: This confirms that you have retained Einbinder & Dunn, LLP ( E & D') to represent you in the above-referenced action." (Id., Exhibit D, at 1.) Likewise, the June 28, 2011 retainer letter begins, "Dear Shabsi: This confirms that you have retained Einbinder & Dunn, LLP ( E & D') to represent you in the above-referenced actions in New York and Louisiana and in the Louisiana action to work with the local attorney." (Id., Exhibit E, at 1.)

Also significant is the fact that Defendants made multiple references to Schreier as their client during a hearing in a consolidated action against the franchisor, and as part of that action, Schreier submitted sworn declarations to that court "focus[ing] on his personal contributions to the Franchisor." (Am. Compl. ¶¶ 69-70.) In Cooke v. Laidlaw Adams & Peck, Inc., 126 AD2d 453 (1st Dep't 1987), the First Department held that "[a]n attorney's appearance in a judicial or quasi-judicial proceeding creates a presumption that the attorney-client relationship exists." Cooke, 126 AD2d at 455 (citation omitted). Finding that an attorney-client relationship between a corporation's employee and corporate counsel did, in fact, exist, that court noted that it was "significant" that corporate counsel appeared at a proceeding involving an employee of a corporation and "admitted on the record before the SEC that they were appearing personally on [the employee's] behalf." Cooke, 126 AD2d at 455.

Accordingly, both the language of the retainer agreements and Defendants' conduct are sufficiently ambiguous as to create an issue of fact regarding the identity of [*5]Defendants' client.

Defendants separately argue that Schreier is not a third-party beneficiary of the retainer agreements between Bayit and E & D, and that there are no "special circumstances" present that would give Schreier standing to bring this legal malpractice claim against E & D notwithstanding the absence of an attorney-client relationship.

"While privity of contract is generally necessary to state a cause of action for attorney malpractice, liability is extended to third parties, not in privity, for harm caused by professional negligence in the presence of fraud, collusion, malicious acts or other special circumstances." Good Old Days Tavern, Inc. v. Zwirn, 259 AD2d 300, 300 (1st Dep't 1999) (citations omitted). "[S]pecial circumstances" are present where the relationship between the plaintiff and the defendant attorney is "tantamount to one of contractual privity." Good Old Days Tavern, Inc., 259 AD2d at 300. The First Department found that special circumstances were present where the plaintiff "was the president and sole shareholder" of the corporation that had retained the defendant attorney and running that corporation was the business from which "he derived his livelihood." Good Old Days Tavern, Inc., 259 AD2d at 300.

Defendants distinguish the holding in Good Old Days from the instant case, citing Topor v. Enbar, 841 N.Y.S.2d 824 (Sup. Ct. NY County 2007). In Topor, the plaintiff alleged that he and multiple related entities had retained and consulted the defendant attorney, and the court found that the plaintiff "held, at most, a minority interest" in the corporate client. Topor, 841 N.Y.S.2d at 824 (emphasis added).

However, the facts in Topor are distinguishable from those in this case. Here, Plaintiffs allege that Schreier was a 50% co-owner of Bayit, that he was Bayit's president and on-site manager, and that he was a "foreseeable third-party beneficiary" of certain agreements between Bayit and the franchisor. (Am. Compl. ¶¶ 2, 18.) Plaintiffs also allege that "Defendants knew or should have known" that the "Franchisor was motivated to terminate Bayit's Franchise," "that Bayit wanted to renew its franchise for an Additional Term of five (5) years until March 31, 2017, and that this renewal term had substantial monetary value to Bayit and Mr. Schreier." (Id. ¶¶ 41, 79.) Moreover, Plaintiffs allege that Defendants "counsel[ed] Mr. Schreier to decline" the offer to provide consulting services to the franchisor, and that as a result of failing to renew the franchise, Schreier lost his annual income of $300,000 and $800,000 in consulting fees. (Id. ¶¶ 9, 14-16.)

Similarly, in Town Line Plaza Assocs. v. Contemporary Props., 223 AD2d 420 (1st Dep't 1996), the First Department found that where an attorney retained by one general partner of a limited partnership knew that another general partner would incur certain personal liability and did not advise him of such, special circumstances approaching privity existed to enable the non-retaining general partner to recover for legal malpractice. Town Line Plaza Assocs. v. Contemporary Props., 223 AD2d at 420.

In assessing a motion to dismiss, this Court must accept each and every allegation [*6]in the Amended Complaint as true and liberally construe the allegations in the light most favorable to Plaintiffs. Guggenheimer v. Ginzburg, 43 NY2d 268, 275 (1977); see CPLR 3211(a)(7). The motion to dismiss inquiry centers "only whether the facts as alleged fit within any cognizable legal theory." Leon v. Martinez, 84 NY2d 83, 87-88 (1994).

Accepting each and every allegation in the Amended Complaint as true and liberally construing the allegations in the light most favorable to Plaintiffs, the facts as alleged fit within cognizable legal theories sufficient to support a cause of action for legal malpractice. The facts alleged in the Amended Complaint regarding the conduct of the parties and the language of the retainer agreements create the possibility that there was an attorney-client relationship between Schreier and E & D. Moreover, even if there was no attorney-client relationship, the allegations in the Amended Complaint make it plausible that "special circumstances" exist that would nonetheless enable Schreier to assert a claim for legal malpractice against Defendants. Accordingly, Defendants' motion to dismiss is denied as to CPLR 3211(a)(7).

2.Documentary Evidence

With respect to CPLR 3211(a)(1), Defendants argue that the retainer agreements between Bayit and E & D establish that E & D represented Bayit only, and therefore constitute documentary evidence requiring dismissal of the legal malpractice claim asserted by Schreier.

Specifically, Defendants argue that Schreier's use of the suffix, "President," after his signature on each of the three retainer agreements show that E & D was retained by Bayit, not Schreier. (Defs.' Br., at 15.) Despite Defendants' arguments, the effect of using this suffix is unclear. In the context of guaranties, the First Department "has consistently held that where there is evidence that a person signed a guaranty as an individual and not on behalf of a corporation, the inclusion of president' after his signature is merely descriptive." PNC Capital Recovery v. Mech. Parking Sys., 283 AD2d 268, 271 (1st Dep't 2001) (citing Chemical Bank v. Masters, 176 AD2d 591, 591 (1st Dep't 1991)). On the other hand, "[i]n modern times most commercial business is done between corporations . . . and where individual responsibility is demanded[,] the nearly universal practice is that the officer signs twice — once as an officer and again as an individual." Salzman Sign Co. v. Beck, 10 NY2d 63, 67 (1961). While the retainer agreements in this case were not signed twice by Schreier, as noted above, they were addressed to Schreier individually care of Bayit and the language of the agreements arguably refer to Schreier, not Bayit, as the client. Accordingly, Schreier's use of the suffix, "President," does not resolve as a matter of law the issue of whether there was an attorney-client relationship between Schreier and Defendants, particularly in light of the retainer agreements' ambiguous language discussed above.

Defendants also argue that the pleadings from the litigated matters in which Defendants represented Bayit are documentary evidence supporting this motion, because [*7]Schreier was not a party to either of those proceedings. (Defs.' Br., at 16.) However, the fact that Schreier was not a party to either of those proceedings does not resolve the issue of whether there was an attorney-client relationship between Schreier and Defendants. Plaintiffs allege that "Schreier retained E & D for the purpose of counseling and advising him about his and Bayit's rights and obligations in their relationship with the Franchisor." (Am. Compl. ¶ 22.) Seemingly consistent with this allegation, the January 11, 2010 retainer agreement states that "you have retained Einbinder & Dunn, LLP ( E & D') to represent you with reviewing and analyzing potential claims to be asserted in connection with your franchise agreement." (Defs.' Order to Show Cause, Exhibit C, at 1.) The June 13, 2011 retainer agreement specifically refers to one of the two litigated matters and states that "[t]his retainer agreement will supplement the first one dated January 11, 2010." (Id., Exhibit D, at 1.) The June 28, 2011 retainer agreement refers to two litigated matters and states that "[t]his retainer agreement will supplement the first one dated January 11, 2010 and the second one dated June 13, 2011." (Id., Exhibit E, at 1.)

Courts have recognized the difference between agreements that supplement, as opposed to supersede, a pre-existing contract. See, e.g., Intercontinental Packaging Co. v. China Nat'l Cereals, Oils & Foodstuff Import & Export Corp., 159 AD2d 190, 193 (1st Dep't 1990) (finding that a contract was supplemented by a subsequently executed agreement that was "in harmony with the original"); Country Glen, L.L.C. v. Himmelfarb, 4 Misc 3d 1015(A), 1015A (Sup. Ct. NY County 2004) (determining that the parties intended a stipulation "to supplement, not supercede," a prior stipulation). While the second and third retainer agreements do refer to the litigated matters in which Schreier was not a party, they also explicitly "supplement," as opposed to supersede, the first retainer agreement, the scope of which mirrors the scope of the representation alleged in the Amended Complaint. As a result, Schreier's non-party status in the litigated matters would not be dispositive. Accordingly, the pleadings do not resolve as a matter of law the issue of whether there was an attorney-client relationship between Schreier and Defendants.

Defendants further argue that Plaintiffs may not rely on parol evidence to modify the retainer agreements, and that even if parol evidence were allowed, it would not establish an attorney-client relationship between Schreier and E & D. As noted above, because of the multiple references to Schreier individually, the retainer agreements alone do not resolve the issue of whether there was an attorney-client relationship between Schreier and Defendants. Accordingly, the Court need not determine at this time whether parol evidence is admissible with respect to the retainer agreements.

"On a motion to dismiss pursuant to CPLR 3211(a)(1), the defendant has the burden of showing that the relied-upon documentary evidence resolves all factual issues as a matter of law, and conclusively disposes of the plaintiff's claim.'" Fortis Fin. Serv. v. Fimat Futures USA, 290 AD2d 383, 383 (1st Dep't 2002). For the reasons discussed above, the retainer agreements do not resolve all factual issues as a matter of law. Also, [*8]even if the retention of E & D by Schreier were not contemplated by the retainer agreements, the allegations in the Amended Complaint could give rise to a separate attorney-client relationship based the words and actions of the parties, or could support a finding of special circumstances sufficient to support a claim for legal malpractice. Accordingly, Defendants' motion to dismiss based on documentary evidence is denied.

III.Order

For the reasons set forth above, it is hereby

ORDERED that Defendants Michael Einbinder and Einbinder & Dunn, LLP's motion to dismiss is denied; and it is

ORDERED that Defendants are directed to serve an answer to the complaint within 20 days after service of a copy of this order with notice of entry; and it is further

ORDERED that counsel are directed to appear for a preliminary conference in Room 442, 60 Centre Street, on November 12, 2013, at 10 AM.

Dated: New York, New York

September 24 , 2013

ENTER:

/s/ Eileen Bransten

Hon. Eileen Bransten, J.S.C.