After a multi-million dollar investment suffered some unexpected tax issues, litigation between some legal giants started. Bloostein v Morrison Cohen LLP 2017 NY Slip Op 31238(U) June 7, 2017 Supreme Court, New York County Docket Number: 651242/2012 Judge: Anil C. Singh involves a state supreme court case and at least one arbitration. The players include Morrison Cohen LLP, Brown Rudnick, LLP and Stroock & Stroock & Lavan LLP. The case now revolves around the meaning of certain releases.
“The plaintiff investors commenced the main action against Morrison Cohen for, inter alia, legal malpractice. In the main action, the plaintiff investors allege that Morrison Cohen was negligent in failing to address the inclusion of a new provision in the documents that comprised the Transaction (the “Transaction Documents”) and as a direct result of this negligence, the investors incurred various damages, including having to pay significant capital gains taxes. The Transaction closed ©n September 26, 2007. ”
“On or about January 9, 2015, Morrison Cohen commenced the third-party action against Stonebridge and Brown Rudnick. In the Second Amended Third-Party Complaint (“Third-party Complaint”), Morrison Cohen alleges that Stonebridge retained two law firms to represent their interests in the Transaction, including Brown Rudnick. The terms of Stonebridge’s retention of Brown Rudnick are set forth in the March 16, 2006 Stonebridge/ Brown Rudnick engagement letter (“Engagement Letter”). The Third-party Complaint further alleges that Brown Rudnick was the primary drafter of the Transaction Documents. In addition to drafting the Transaction Documents, Brown Rudnick is also alleged to have issued a tax opinion letter to the plaintiff investors (the “Opinion Letter”). The Third-party Complaint states three causes of action: (1) indemnification and contribution as against Stonebridge (“First Cause of Action”) (2) indemnification and contribution as against Brown Rudnick concerning the Opinion Letter (“Second Cause of Action”); and (3) indemnification and contribution as against Brown Rudnick concerning the Transaction Documents (“Third Cause of Action”). Stonebridge and Brown Rudnick filed motions to dismiss by their respective counsel. ”
“Stroock argues that Brown Rudnick is precluded from seeking contribution because under the Settlement Agreement with Stonebridge it was released from all claims, asserted or that could have been asserted relating in any manner to [Stroock’s] representation of [Stonebridge] or any of [Stone bridge’s] current or former parents, subsidiaries, affiliates, successors, or assigns, and each of their current or former employees, principals, partners, members, ag~nts, advisors, representatives, or attorneys in the Transaction. (emphasis added). Paragraph 5 of the Settlement Agreement further provides that: [t]he Parties intend that the release of [Stroock] … be within the scope of New York General Obligations Law (‘GOL’) §15-108, and that [Stroock] be provided with, and [is] entitled to, a contribution bar to the fullest extent permitted by law. The Settlement Payment shall be deemed to be the monetary · consideration required to bring the release of [Stroock] within the scope of New York GOL § 15-108 … and in full satisfaction of all claims against [Stroock], including, but not limited to, any claims that have been or may be asserted in Bloostein v. Morrison Cohen LLP et al., Index No. 651242/12 (Sup. Ct. N.Y. Cnty.) … NY GOL § 15-108 states in relevant part that “[ w] hen a release or a covenant not to sue or not to enforce a judgment is given to one of two or more persons liable or claimed to be liable in tort for the same injury, … , it does not discharge any of the other tortfeasors from liability for the injury … unless its terms expressly so provide but … it reduces the claim of the releaser against the other tortfeasors.” (emphasis added). The Court of Appeals has held that GOL § 15-108 was designed precisely to allow “defendant[s] to settle a claim and obtain release without fear of being brought back into the action by a non-settling defendant seeking contribution.” Mitchell v. New York Hosp. 61 N.Y.2d209, 215 (1984). NY GOL § 15-108( d) also lays out the requirements for a release and covenant that fall within the scope of the provision 1 • Brown Rudnick does not dispute the validity of the release with respect to GOL §15-108(d). The gravamen of Brown Rudnick’s opposition is that GOL § 15-108(a) applies only to persons liable for “the same injury” and the injury in this action is not the same injury as in the Arbitration. ”
“Brown Rudnick argues that there are distinct injuries in the instant action and the Arbitration. It claims that the injuries in the Arbitration were “having to pay legal fees and disbursements to Stroock for the negligent legal services Stroock provided Stonebridge; deprivation of the full amount -of the loan fee Stonebridge was to recover had an Event of Default not occurred; (and) Stonebridge’s payment of c substantial fees to participants in the Transaction.” (NYSCEF No. 145 at p.4-5). Brown Rudnick contends that the injuries in this action are distinct as they concern “significant capital gains taxes; (and) legal fees and disbursements the (plaintiff investors) paid to Morrison Cohen in connection with the Transaction.” Id. This argument is without merit. Unlike Ackerman, the contribution claim brought in this action by Brown Rudnick against Stroock stems from the same Transaction, Qpinion Letter and losses as those addressed in the Arbitration. This action and the Arbitration is predicated upon legal malpractice. Both Brown Rudnick and Stroock may be held j~intly or severally culpable to the plaintiff investors for the same injury. Accordingly, GOL §15-108 and the release bars Brown Rudnick from seeking contribution from Stroock. “