Plattsburgh Hous. Auth. v Cantwell  2015 NY Slip Op 51832(U) [49 Misc 3d 1221(A)] Decided on September 23, 2015 Supreme Court, Clinton County  Muller, J. is the story of an upstate  city which had a housing authority.  Once upon a time it hired an attorney to be its outside counsel.  Then she was hired as a general counsel.  Her pay ramped up.  Then the Executive director retired and the general counsel asked to be considered.  At the end of this progression, the general counsel had been appointed both GC and Executive Director, and the pay had now gone through the roof.  Was this a breach of fiduciary duty?

“Following this meeting, defendant drafted a “Plattsburgh Housing Authority Executive Director Employment Agreement” (hereinafter the Employment Agreement) and gave it to Morris for his review. Morris then raised certain concerns including, inter alia, that the termination provision in the Employment Agreement did not give plaintiff “the option to renew or not renew [the] contract” at the conclusion of every term. According to Morris, “[defendant] advised [him] that she included a provision that either party could terminate the [Employment Agreement] upon [60]-days notice,” which alleviated his concern. The Employment Agreement was then executed on October 1, 2011, with both Morris and Lucia signing on plaintiff’s behalf.

Defendant began working as Executive Director on that same date, shadowing Lucia until her retirement on December 31, 201l. During this transition period, defendant continued to serve as General Counsel with the Board’s knowledge and consent. With that said, the Board apparently believed that defendant would no longer hold the position of General Counsel once she became the sole Executive Director on January 1, 2012. She continued to do so, however, and from October 1, 2011 to September 2012 she was paid a salary of $84,831.00 per year as Executive Director and $42,342.00 per year as General Counsel, for a total annual salary of $127,173.00.

At some point prior to September 2012, defendant reviewed plaintiff’s Basic Salary Schedule and advised Jean Etesse, plaintiff’s in-house accountant, that her rate of pay should be higher as a result of her 14 years of service with the organization. In this regard, the Employment Agreement provided that, as “compensation for services rendered by Employee as Executive Director . . . , the Authority agrees to pay the Employee a starting salary of $85,000.00 to be placed on the on the [sic] Plattsburgh Housing Authority Basic Salary Schedule, . . . .” Several paragraphs later, the Employment Agreement then states that, “[f]or purposes of benefits calculations the Employee shall be considered to have 14 years of service with the Employer as of 12/30/11 . . . .” According to plaintiff, defendant interpreted this provision as applying to her compensation and advised Etesse that her starting salary should have been more than $85,000.00. [*3]Morris then authorized this increase in salary — allegedly feeling “bound by the terms of the [Employment] Agreement” — and defendant’s salary as Executive Director was increased to $108,807.00 per year and her salary as General Counsel was increased to $50,332.00 per year, for a total annual salary of $159,139.00. Defendant further directed Etesse to make the salary increase retroactive to her October 1, 2011 start date and, as a result, was paid a lump sum of $32,454.01.”

“With respect to the first cause of action alleging a breach of fiduciary duty, “the attorney-client relationship imposes on the attorney [t]he duty to deal fairly, honestly and with undivided loyalty . . . including maintaining confidentiality, avoiding conflicts of interest, operating competently, safeguarding client property and honoring the clients’ interests over the lawyer’s'” (Country Club Partners, LLC v Goldman, 79 AD3d 1389, 1391 [2010], quoting Ulico Cas. Co. v Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d 1, 9 [2008] [internal quotation marks and citations omitted]; see Krouner v Koplovitz, 175 AD2d 531, 532 [1991]). “To recover on its claim, plaintiff is required to prove both the breach of a duty owed to it and damages sustained as a result'” (Country Club Partners, LLC v Goldman, 79 AD3d at 1391, quoting Ulico Cas. Co. v Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d at 10 [citation omitted]). “That is, a client must establish actual and ascertainable damages that would not have occurred but for the attorney’s conduct” (Country Club Partners, LLC v Goldman, 79 AD3d at 1391 [citations and internal quotation marks omitted]).

Here, the Court finds that plaintiff has established its prima facie entitlement to judgment as a matter of law relative to its first cause of action. Defendant was undisputably employed as General Counsel to plaintiff at all relevant times and, in her capacity as General Counsel, had a duty to deal with plaintiff fairly, honestly and with undivided loyalty. Morris states under oath that defendant drafted the Employment Agreement and presented it to him for review without recommending that plaintiff retain independent counsel to review it prior to signature. Morris [*5]further states under oath that defendant later interpreted the Employment Agreement as providing for an increase in her salary, again without recommending that the issue be reviewed by independent counsel. There was a blatant conflict of interest in both instances that defendant either failed to recognize or simply ignored. Plaintiff has further demonstrated actual and ascertainable damages.

In opposition, defendant contends that she was not acting as General Counsel to plaintiff when she drafted the Employment Agreement. Rather, she was negotiating the terms of her employment as Executive Director and acting solely on her own behalf. According to defendant, plaintiff was well aware of this fact. Interestingly, Lucia has submitted an affidavit in support of this contention, stating as follows:

“At no time did Mr. Morris ever state to me that he believed that when Lori was negotiating her contract that she was acting on behalf of the Plattsburgh Housing Authority or providing housing authority legal advice as its counsel in negotiating and preparing the contract. I signed the contract at the instruction of Mr. Morris and I understood and believed it was clear that Lori was acting for herself on one side of the negotiating table and Mr. Morris was representing the housing authority on the other side of the negotiating table.”

Lucia further states that Morris was aware that defendant would be acting as both the Executive Director and General Counsel following January 1, 2012, and in fact directed her to contact “the executive director of another housing agency, [who] was also an attorney . . . to discuss the role of Executive Director/attorney.” She did so and then reported back to Morris, informing him that “it was [her] understanding that HUD did not approve of a housing authority having an employee hold two full-time positions.”

Defendant next contends that her increase in salary did not require contract interpretation but, rather, resulted from application of plaintiff’s normal policies and procedures. In this regard, Lucia states as follows:

“An issue has been raised about Lori Cantwell’s salary as Executive Director. As long as I had been with the Plattsburgh Housing Authority, it was always the policy and practice of the organization that management personnel would receive longevity pay according to the longevity schedule maintained by the organization. . . .

“It was also the policy and practice of the Plattsburgh Housing Authority that when a person moved from one management position to another, their longevity time would follow to the new position. . . . This practice was followed for all employees moving from one management position to another.

“Lori Cantwell was in the management pay category in her position as Attorney to the Plattsburgh Housing Authority. Thus, when she was named as the Executive Director of the Authority, she was credited the longevity she had earned in her capacity of Attorney as was established practice.”

Thus, according to Lucia, defendant was appropriately given credit for 14 years of service [*6]— dating back to 1997 when she was retained as counsel — and her salary was appropriately increased based upon plaintiff’s longevity schedule.

Under the circumstances, the Court finds that defendant has raised an issue of fact as to whether she breached her fiduciary duty to plaintiff. If in fact defendant was not acting in her capacity as General Counsel when she drafted the Employment Agreement and plaintiff was aware of this, then she may not have violated her fiduciary duty to plaintiff (see Kallman v Krupnick, 67 AD3d 1093, 1095 [2009], lv denied 14 NY3d 703 [2010]; Beltrone v General Schuyler & Co., 252 AD2d 640, 641 [1998]; see Greene v Greene, 56 NY2d at 92—93, 451 N.Y.S.2d 46, 436 N.E.2d 496). To the extent that Morris reached out to the Executive Director of another housing agency who was also an attorney, there appears to be some question in this regard. Similarly, if defendant’s increase in salary resulted not from an interpretation of her Employment Agreement but rather from application of plaintiff’s normal policies and procedures, then again — she may not have violated her fiduciary duty. Given the standard applicable to motions for summary judgment — issue finding and not issue determination — the Court declines to grant plaintiff summary judgment as a matter of law relative to its first cause of action.^[FN2]“