Flomenhaft v Finkelstein  2015 NY Slip Op 03468  Decided on April 28, 2015  Appellate Division, First Department  has been on the back burner for a long time, and now has again reached the First Department.  Attorney Flomenhaft accuses Andrew Finkelstein of slander.  Finkelstein is royalty in New York.  “Defendant Andrew Finkelstein (Finkelstein) is an attorney and is the managing partner of defendant law firm Finkelstein & Partners, LLP (FLLP), and the sole shareholder of defendant Finkelstein, PC (FPC). FPC is a partner of both Jacoby and of FLLP.”  We do not believe there are any larger law firms in NY than Finkelstein & Partners.

Issues addressed in this decision are what happens when a case is started with a summons with notice, and how do fraud pleading rules affect a recovery.

“Plaintiff is an attorney who, after dissolving his own practice, became associated with nonparty Jacoby & Meyers, LLP (Jacoby). Defendant Andrew Finkelstein (Finkelstein) is an attorney and is the managing partner of defendant law firm Finkelstein & Partners, LLP (FLLP), and the sole shareholder of defendant Finkelstein, PC (FPC). FPC is a partner of both Jacoby and of FLLP. In April 2009, Jacoby assigned plaintiff to work on a personal injury action that had been commenced on behalf of nonparty Joel Harrison (Harrison) in Supreme Court, Broome County ^[FN1]. In December 2009, plaintiff resigned from Jacoby and re-formed his old practice. Harrison decided to have plaintiff continue his representation in the personal injury action and Jacoby caused the necessary consent to be executed and transferred the file. The retainer agreement between plaintiff and Harrison provided that plaintiff would advance all litigation expenses and would be reimbursed out of Harrison’s recovery, if any. After the passage of only a few months, Harrison terminated plaintiff and re-retained Jacoby.

In August 2010, Harrison, represented by FLLP, commenced an action against plaintiff in Supreme Court, Broome County. The allegations in the complaint, most of which were made upon information and belief, revolved around the litigation expenses that had been discussed in the retainer agreement between the two parties. Harrison asserted that, notwithstanding plaintiff’s promise that he would advance litigation expenses, plaintiff told him that he would not do so and urged Harrison to borrow $40,000 for the expenses from a litigation funding company. The complaint alleged, inter alia, that plaintiff directed the loan company to pay the proceeds to his law firm and that he failed to place them in an attorney escrow account. Harrison asserted causes of action for conversion, breach of fiduciary duty, legal malpractice, and fraud, and sought an accounting from plaintiff.

This action is based on a statement allegedly made by Finkelstein to Harrison concerning the loan. According to the complaint, Finkelstein told Harrison that plaintiff “took your money and used it for his personal use.” Plaintiff claims that this statement constituted slander per se. He further asserts that Finkelstein was the source of the information that Harrison alleged in his[*2]complaint against plaintiff, that the information was patently false, and that as a result Finkelstein, FLLP and FPC are liable to him in fraud. Plaintiff also seeks punitive damages from defendants, based on the two causes of action asserted in the complaint, as well as defendants’ conduct against him that was the subject of a separate litigation between him and defendants (see Flomenhaft v Jacoby & Meyers, LLP, 122 AD3d 422 [1st Dept 2014]). In that action, which was commenced in 2010, plaintiff claimed that defendants here, as well as others, defamed him when, after he left Jacoby, they informed clients on whose matters he had worked that he had declared personal bankruptcy.”

“This action was commenced by summons with notice and the complaint was served upon defendants’ demand for it. The summons with notice stated that the action sounded in slander, and did not mention the fraud claim. Defendants moved to dismiss the complaint. They argued that plaintiff failed to state a cause of action for slander per se, because Finkelstein’s statement did not constitute “publication” and because, even if it did, the statement was privileged as being pertinent to Harrison’s action against plaintiff. The statement was pertinent to that litigation, defendants argued, since, according to them, it was made the day before Harrison’s deposition in that case. Defendants further argued that the fraud claim should be dismissed for lack of jurisdiction, since it had not been mentioned in the summons with notice as required by CPLR 305(b). Alternatively, they sought dismissal of that claim for failure to state a cause of action, asserting that plaintiff was not entitled to rely on any misrepresentations made by defendants to Harrison. They also claimed that the fraud claim was time-barred, since it was no more than a trumped-up defamation claim. Defendants also sought an order striking the claim for punitive damages, and an order awarding them costs and attorneys’ fees based on their belief that the complaint was frivolous.

Plaintiff further argues that, pursuant to CPLR 305(c), the court should have permitted amendment of his summons nunc pro tunc to give notice of his intention to plead a fraud claim against defendants. Defendants do not argue, as the court held, that amendment is unavailable as a matter of jurisdiction. Rather, they essentially claim that amendment would be futile because plaintiff cannot state a claim for fraud. Defendants focus on the justifiable reliance element necessary to the establishment of any fraud claim, and assert that plaintiff could not have relied on statements made not to him but to a third party, namely Harrison. Plaintiff claims this is not [*3]so, relying on Buxton Mfg Co. v Valiant Moving & Stor. (239 AD2d 452 [2d Dept 1997] [“(f)raud, however, may also exist where a false representation is made to a third party, resulting in injury to the plaintiff”]). Defendants, on the other hand, cite much more recent cases, from this Court, which hold that a party may not rely on a misrepresentation to a third party (Wildenstein v 5H & Co, Inc., 97 AD3d 488, 490 [1st Dept 2012]; Briarpatch Ltd., L.P. v Frankfurt Garbus Klein & Selz, P.C., 13 AD3d 296, 297 [1st Dept 2004, lv denied 4 NY3d 707 [2005]).”