Millennium Import, LLC v. Reed Smith LLP

104 A.D.3d 190, 958 N.Y.S.2d 375

This text of 104 A.D.3d 190 (Millennium Import, LLC v. Reed Smith LLP) is published on Counsel Stack Legal Research, covering Appellate Division of the Supreme Court of the State of New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Millennium Import, LLC v. Reed Smith LLP, 104 A.D.3d 190, 958 N.Y.S.2d 375 (N.Y. Ct. App. 2013).

Opinion

OPINION OF THE COURT

Saxe, J.

This is a legal malpractice action in which defendant law firm [192]*192brought third-party claims for contribution against three other law firms based on the allegation that they gave erroneous advice to plaintiff, either directly or through plaintiffs parent company, that contributed to plaintiffs losses. The motion court granted the dismissal motion of each of the three firms, citing Hercules Chem. Co. v North Star Reins. Corp. (72 AD2d 538 [1st Dept 1979]), on the ground that defendants’ affirmative defense of negligence on the part of plaintiff and/or its agents precluded the third-party complaint for contribution against the agents. This appeal therefore requires us to decide whether, under Hercules Chem. Co., defendants’ affirmative defense of comparative negligence, based in part on the alleged malpractice of the other firms, precludes its third-party claims.

Plaintiff Millennium is a beverage company owned by luxury goods company LVMH, the owner of such brands as Louis Vuitton, Moet and Hennessy. Plaintiff marketed a high-end Polish vodka in the United States under the brand name “Belvedere,” but was sued by a California winery (the winery), also named Belvedere, for trade-name infringement. The dispute was resolved by a settlement agreement in which plaintiff agreed to pay the winery $30,000 per year for a license to use the Belvedere name for its vodka; the agreement did not cover use of the Belvedere name for distilled spirits.

Plaintiffs Belvedere vodka was highly successful, rendering the licensing fee “nominal.” In what the parties acknowledge was likely an attempt to renegotiate the licensing fee, in March 2004, the winery wrote to plaintiff, stating that it was negotiating with a distributor of gin for a license of the Belvedere name.

Plaintiff forwarded the letter to defendant law firm Reed Smith, as one of its attorneys, and Reed drafted a response. In addition to sharing the draft response with plaintiff, Reed Smith also forwarded it to LVMH and LVMH’s counsel, third-party defendant law firm Barack, Ferrazzano, Kirschbaum & Nagelberg (the Barack firm). The letter was sent to the winery in April 2004. It asserted, among other things, that plaintiff, through its successful use of the mark, had obtained certain rights in the mark, and that the gin distributor might be liable to plaintiff for “passing off’ its gin as associated with plaintiffs vodka.

The winery did not respond for some 15 months. During that time, LVMH became the 100% owner of plaintiff. In the winery’s response in July 2005, it stated that the Reed firm’s letter was a challenge to the winery’s right to license the mark, and therefore a breach of the licensing agreement, and demanded that plaintiff cure the breach.

[193]*193To this end, plaintiff had California counsel, third-party defendant Berry & Perkins (the Berry firm), prepare a draft response. The draft was shared with LVMH and Reed Smith, as well as with the Barack firm. The response sent to the winery also incorporated analysis by third-party defendant Fross, Zelnick, Lehrman & Zissu (the Fross firm), another law firm advising LVMH on plaintiffs rights under the licensing agreement. The response maintained that a gin distributor’s use of the Belvedere mark might infringe on rights acquired by plaintiff.

The winery then sued plaintiff for breach of the licensing agreement, and was ultimately granted summary judgment on its claims. Rather than appeal, plaintiff entered into a settlement agreement that included a payment to the winery of $83 million. Plaintiff then sued Reed Smith for malpractice. Reed Smith asserted an affirmative defense of contributory fault against plaintiff and its agents, and then brought a third-party action against the Berry, Barack and Fross firms seeking contribution under CPLR 1401, contending that their negligence with regard to advising plaintiff and/or LVMH contributed to plaintiffs loss.

The motion court granted third-party defendants’ separate motions to dismiss the third-party complaint against them solely in reliance on the holding of Hercules Chem. Co. (72 AD2d 538), that a defendant’s affirmative defense of comparative negligence precludes a third-party claim for contribution against any third-party defendant who was acting as the plaintiffs agent, since the affirmative defense and the third-party claims are duplicative. We disagree with the motion court.

It is well settled that an attorney sued for malpractice may assert a third-party claim against another lawyer who advised the plaintiff on the same matter. The leading case on this point is Schauer v Joyce (54 NY2d 1 [1981]). In Schauer, an attorney was sued by his client for malpractice, due to his failure to obtain alimony for his client. He, in turn, asserted a third-party claim for contribution under CPLR 1401 against the lawyer who succeeded him in representing the plaintiff, claiming that the successor lawyer’s negligence in failing to properly reapply for alimony contributed to the loss. The Appellate Division upheld the dismissal of the third-party claim, reasoning that the third-party defendant could not be liable for the injury caused to the plaintiff by the third-party plaintiff; in the Court’s view, “[t]he extent to which plaintiff either personally or [194]*194through her agent [third-party defendant] failed to mitigate damages is a matter of defense” (79 AD2d 826, 826 [3d Dept 1980]). But the Court of Appeals reinstated the contribution claim, explaining that

“CPLR 1401, which codified this court’s decision in Dole v Dow Chem. Co. (30 NY2d 143), provides that ‘two or more persons who are subject to liability for damages for the same personal injury, injury to property or wrongful death, may claim contribution among them whether or not an action has been brought or a judgment has been rendered against the person from whom contribution is sought.’ The section ‘applies not only to joint tortfeasors, but also to concurrent, successive, independent, alternative, and even intentional tortfeasors’ ” (Schauer, 54 NY2d at 5, quoting Siegel, NY Prac § 172 at 213 [1978], and citing McLaughlin, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR 01401:3 at 362-363 [1976 ed]).

Not only do we find this reasoning applicable to the third-party claim against the law firm that served directly as plaintiff’s counsel, but we also see no basis to find this reasoning inapplicable to the law firms whose allegedly negligent advice was supplied to plaintiff via plaintiffs parent company. It is well settled that attorneys may be liable for their negligence both to those with whom they have actual privity of contract and to those with whom the relationship is “so close as to approach that of privity” (Prudential Ins. Co. of Am. v Dewey, Ballantine, Bushby, Palmer & Wood, 80 NY2d 377, 382 [1992]). Since here the allegations support a finding that the advice of the two firms acting as counsel to plaintiffs parent company was given “for the very purpose of inducing action” on plaintiffs part, the third-party claim against those firms for contribution is actionable (id. at 383).

The motion court’s decision does not mention Schauer v Joyce. It relies solely on Hercules Chem. Co. — which was issued in 1979, two years before Schauer v Joyce was decided. For the reasons that follow, we conclude that whatever applicability the Hercules

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Related

Dole v. Dow Chemical Co.
282 N.E.2d 288 (New York Court of Appeals, 1972)
Brown v. Poritzky
283 N.E.2d 751 (New York Court of Appeals, 1972)
Schauer v. Joyce
429 N.E.2d 83 (New York Court of Appeals, 1981)
Prudential Insurance v. Dewey, Ballantine, Bushby, Palmer & Wood
605 N.E.2d 318 (New York Court of Appeals, 1992)
Hercules Chemical Co. v. North Star Reinsurance Corp.
72 A.D.2d 538 (Appellate Division of the Supreme Court of New York, 1979)
Schauer v. Joyce
79 A.D.2d 826 (Appellate Division of the Supreme Court of New York, 1980)

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Bluebook (online)
104 A.D.3d 190, 958 N.Y.S.2d 375, Counsel Stack Legal Research, https://law.counselstack.com/opinion/millennium-import-llc-v-reed-smith-llp-nyappdiv-2013.