820 F. Supp. 2d 429
E.D.N.Y2011Background
- Marcum LLP and Citrin sue Barbagallo over retirement benefits and post-employment conduct related to a Marcum contract; Barbagallo's employment with Margolis/Margolis assets merged into Marcum via a non-equity partner contract that includes a non-compete and duty not to solicit clients; Marcum alleges Barbagallo copied and emailed confidential client lists to Citrin and solicited clients post-employment; Citrin is a co-defendant seeking dismissal of several counterclaims; the court granted some dismissals and set trial with mixed jury/advisory roles; NY law governs contract terms and related tort claims; ERISA retirement benefits and related fiduciary duties are central to the dispute; the court addresses reform of contract, damages, and enforceability of non-compete.
- The action involves contract interpretation, potential reformation for a scrivener’s error, alleged professional negligence and misappropriation of confidential information, unjust enrichment claims, and tort claims including interference with contract and aiding and abetting fiduciary breaches; Barbagallo’s retirement benefits and related fiduciary claims are to be tried, along with other damages and ownership disputes (telephone number).
- The contract governs post-employment client handling, including a two-year non-compete and a requirement to compensate Marcum for clients that leave; Barbagallo’s notice and departure timing triggered questions about retirement entitlements; the court bifurcates legal and equitable issues for trial; the judge preliminarily filters claims (e.g., dismissing punitive damages, certain unjust enrichment claims, and malpractice-based gross negligence to the extent tied to malpractice).
- The contract superseded Barbagallo’s Margolis agreement and binds Barbagallo as an at-will employee; the Handbook and Commission provisions govern referrals and commissions; Barbagallo allegedly used confidential Marcum data to Citrin; the court resolves that some claims survive to trial while others are dismissed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Reformation of contract due to scrivener’s error | Marcum: error intended 'shall not be' reflect. | Barbagallo: no miswriting evident. | Plausible claim; reformable if clear and convincing evidence. |
| Gross negligence and malpractice | Marcum: Barbagallo breached duties; damages. | Barbagallo: ordinary negligence suffices; malpractice not proven. | Malpractice/gross negligence dismissed to third parties; ordinary negligence for employee duties to be tried. |
| Unjust enrichment | Marcum: Barbagallo and Citrin unjustly profited from misappropriated client relations. | There is a contract governing the relationship; no recovery without breach. | Dismissed against Citrin and Barbagallo; contract governs recovery. |
| Tortious interference with non-compete and contract | Marcum: Citrin knowingly aided Barbagallo to breach non-compete. | Citrin: no wrongful interference; allowed competition. | Tortious interference with the non-compete may proceed; interference with employment contracts per se is not. |
| Punitive damages and equitable relief | Marcum seeks punitive and equitable relief for misappropriation/fiduciary breaches. | Punitive damages require public-oriented outrageous conduct. | Punitive damages dismissed; remaining equitable and legal claims proceed. |
Key Cases Cited
- Hart v. Blabey, 287 N.Y.2d 257 (N.Y. 1942) (high standard for reformations; miswriting requires strong proof)
- Chimart Assocs. v. Paul, 66 N.Y.2d 570 (N.Y. 1985) (strong presumption against reforming writings; high burden to overcome)
- State Street Trust Co. v. Ernst, 278 N.Y.104 (N.Y. 1938) (accountant liability; privity considerations for third-party reliance)
- Carvel Corp. v. Noonan, 3 N.Y.3d 182 (N.Y. 2004) (tortious interference and misappropriation standards; evolving fiduciary duties)
- BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (N.Y. 1999) (reasonableness of restrictive covenants; enforceability standards)
- Guard-Life Corp. v. S. Parker Hardware Mfg. Corp., 50 N.Y.2d 183 (N.Y. 1980) (wrongful means standard for interference with at-will employment; non-compete separate enforceability)
- Nifty Foods Corp. v. Great Atlantic & Pacific Tea Co., 614 F.2d 832 (2d Cir. 1980) (economic pressure and wrongful interference considerations; at-will employment context)