Mass v. McClenahanMass v. McClenahan
- Reporters:
- , , , ,
- Before:
- Martin
MEMORANDUM OPINION AND ORDER
MARTIN, District Judge:Mitchell Mass, a New York attorney, was retained by defendant Imperial Marketing, Inc. (“Imperial”) in February of 1992. Between that time and March of 1993, he advised Imperial and several affiliated entities, the other corporate defendants named in this action, on a range of corporate and litigation matters.
In the fall of 1992, Bruce McClenahan, Imperial’s sole shareholder, allegedly began to encourage Mass to move to Las Vegas, where Imperial and McClenahan’s other businesses were headquartered, and to accept employment as an executive of Imperial. These overtures led to negotiations and even
On or about January 23,1993, McClenahan allegedly made a telephone call to Mass in which he terminated the employment agreement between Mass and Imperial. Mass claims that, during the telephone call, McClenahan told Mass that he had shown the employment contract to “advisors,” who had informed McClenahan that hiring a “New York Jew” would be disastrous for Imperial and McClenahan. According to Mass, McClenahan explained that his “advisors’ ” concerns were the reason for the termination of the employment agreement. Celli Aff. Ex. D., at 294-97.
Thereafter, Mass continued to serve as Imperial’s attorney. However, on or about March 12, 1993, McClenahan allegedly made another telephone call in which he terminated Mass as an attorney for the corporation. According to Mass, McClenahan told him that McClenahan’s “advisors” had suggested that Imperial should not continue to retain a “New York Jew” as its attorney; once again, McClenahan allegedly said that the concerns of his “advisors” were the reason for Mass’ termination as Imperial’s attorney. Id. at 328, 517-19.
Mass then filed the present lawsuit, in which he has brought a claim under
1.
The
Defendants ask the court to grant summary judgment on plaintiffs
Defendants note that there is a strong public policy supporting the right of a client to discharge an attorney at any time, despite contractual provisions to the contrary.
See, e.g., In re Cooperman,
83 N.Y.2d 465, 611 N.Y.S.2d 465, 633 N.E.2d 1069 (Ct. App.1994). From this they argue that, because an attorney has no contractual right to continued employment by his client, plaintiff has not stated a claim under
While the worthwhile goal of protecting a client’s right to discharge a lawyer at any time may make it appropriate to impose a higher standard of proof of discriminatory intent when a lawyer brings a claim of discrimination, in the present case there is direct evidence that plaintiff was discharged because he was “a New York Jew.” If this is in fact what happened, the public policy embodied in
Nor would application of
The attorney-client bond between Mass and Imperial possesses some of the features that the
Roberts
Court identified as ear
However, anything more than a superficial examination of the attorney-client relationship between Imperial and Mass reveals that it was not the kind of close personal bond with which the First Amendment is concerned. Imperial hired Mass in order to protect and advance its business interests. It relied on Mass’ professional expertise in much the same way as it might rely on the expertise of an accountant, consultant or investment banker. The various Imperial executives who interacted with Mass did not draw any “emotional enrichment” from the relationship; they did not “cultivate shared ideals and beliefs” together with Mass; their sense of self was not positively reinforced through their association with Mass. Imperial’s interest in associating, or not associating, with Mass thus does not merit constitutional protection.
Since defendants’ statutory and constitutional arguments are unavailing, defendants’ motion for partial summary judgment on plaintiffs
II.
The
Defendants also seek summary judgment on plaintiffs
To establish a claim under
Plaintiff must do more than make vague, general or conclusory accusations in order to establish the existence of a conspiracy actionable under
Plaintiff has described in detail the roles played by Imperial and McClenahan in the deprivation of plaintiffs rights under
III. The Breach of Contract Claim
Plaintiff has named both Imperial and McClenahan as defendants on his claim for breach of the employment contract. Both defendants seek summary judgment on the ground that the agreement is void and unenforceable. McClenahan also argues that, even if the agreement is enforceable, he cannot be held liable for Imperial’s breach of the agreement.
A. The Enforceability of the Contract
The defendants contend that the employment contract into which Mass and Imperial entered is unenforceable because plaintiff did not observe the requirements of the Nevada Supreme Court’s Rule of Professional Conduct 158(1) when negotiating the contract. 5
The court agrees that Nevada law controls on this issue. The validity of a contract must be determined according to the law of the state having the greatest interest in its formation. See Stephens v. American Home Assur. Co., 811 F.Supp. 937, 946 (S.D.N.Y.1993). Here, the contract between Mass and Imperial was negotiated in large part in Nevada and was made there; and, as discussed below, Nevada has a significant interest in protecting Imperial, a corporation organized under its laws and doing business within the state, from the possible “overreaching” of Mass, Imperial’s attorney. New York’s interests in the formation of the contract are comparatively minor.
However, the court rejects defendants’ contention that a contract that violates the terms of SCR 158(1) is per se unenforceable. 6 No Nevada court has held that a violation of the rule automatically voids the resulting contract. Indeed, when applying SCR 158(a) to an attorney for disciplinary purposes, Nevada’s highest court emphasized the need for compliance with the “spirit and purpose” of the rule rather than with the rule’s exact requirements. In re Singer, 109 Nev. 1117, 865 P.2d 315, 317 (1993). There is no reason to believe that Nevada’s courts would take a different approach when determining whether to enforce a contract between a lawyer and his client.
Although defendants’ reliance on the precise terms of SCR 158(a) is unwarranted, it is clear that the contract at issue would be unenforceable if it were found that Mass had exercised undue influence over Imperial when the contract was executed. Nevada’s courts have held that, when an attorney deals with his client for the former’s benefit, a presumption arises that the transaction between them is improper.
See In re Singer,
109 Nev. 1117, 865 P.2d 315, 317 (1993);
Davidson v. Streeter,
68 Nev. 427, 234 P.2d 793, 799 (1951). To overcome that presumption, “an attorney must demonstrate by ... clear and satisfactory evidence that
There is, at the very least, a genuine question of fact as to whether Mass has met these requirements. Mass negotiated for his contract over a period of several weeks with McClenahan, an experienced entrepreneur who routinely decided who to hire as Imperial executives, how much to pay them, when to fire them, and whether to make them sign noncompetition agreements. Celli Aff. Ex. D, at 168-70; id. Ex. E, at 161-63; id. Ex. F at 20-22, 30-32, 34-35; id. Ex. J, at 16; id. Ex. K, at 83-84; id. Ex. L, at 68-72. Under these circumstances, it is difficult to believe that McClenahan did not understand the “nature and effect” of Mass’ employment agreement. Certainly McClenahan did not lack sources of “independent advice”: Mass testified at his deposition that, a month before the agreement was signed, McClenahan told him that he planned to “have the agreement reviewed by his professionals, by his lawyers, by other people.” Levi Aff. Ex. C, at 139.
Since the parties’ submissions would allow a reasonable factfinder to conclude that the employment contract was not the product of “overreaching” on Mass’ part, defendants’ motion for summary judgment on that ground is denied.
B. McClenahan’s Liability on the Contract Claim
However, the court can find no reason to hold McClenahan hable for any breach of the employment contract by Imperial. Mass contends that McClenahan should be held hable for Imperial’s breach on a veil-piercing theory; but “it is well settled that New York courts are reluctant to disregard the corporate entity.” Wm. Wrigley Jr. Co. v. Waters, 890 F.2d 594, 600 (2d Cir.1989). 7 In general, to justify piercing the corporate veil, a plaintiff must show that “(1) the owner[] exercised complete domination of the corporation in respect to the transaction attacked; and that (2) such domination was used to commit a fraud or wrong against the plaintiff which resulted in plaintiffs injury.” Morris v. Dep’t of Taxation & Finance, 82 N.Y.2d 135, 603 N.Y.S.2d 807, 810-11, 623 N.E.2d 1157 (Ct.App.1993); cf. Itel Containers Int’l Corp. v. Atlanttrafik Exp. Serv. Ltd., 909 F.2d 698, 703 (2d Cir.1990) (New York law ahows veil to be pierced either when there is fraud, or when corporation has been used as alter ego). However, “[b]e-cause a decision whether to pierce the corporate veil in a given instance will necessarily depend on the attendant facts and equities, the New York cases may not be reduced to definitive rules governing the varying circumstances when the [veil-piercing] power may be exercised.” Morris, 603 N.Y.S.2d at 810, 623 N.E.2d at 1160.
Plaintiff has not satisfied the two-prong test set forth in
Morris.
First, it is not clear that, with respect to the employment contract, McClenahan “dominated” Imperial so “completely” that it was reduced to a mere instrumentality of his.
See Lowendahl v. Baltimore & Ohio R. Co.,
247 A.D. 144, 287 N.Y.S. 62, 75 (App.Div.),
aff‘d,
272 N.Y. 360, 6 N.E.2d 56 (Ct.App.1936). It is true that McClenahan himself negotiated the
However, even assuming that plaintiff did “completely dominate” Imperial with respect to the making and breach of Mass’ employment contract, Mass has not satisfied the second prong of the Morris test: he has produced no evidence which might show that McClenahan “misused the corporate form for his personal ends so as to commit a wrong or injustice on [Mass].” 603 N.Y.S.2d at 811, 623 N.E.2d at 1161. There is no indication that McClenahan sought to further his personal interests, rather than those of Imperial, when he negotiated and later terminated the employment contract. Nor has Mass shown that, by choosing to use the corporate form instead of doing business in his personal capacity, McClenahan somehow tricked or took advantage of Mass. See Guptill Holding Co. v. State, 33 A.D.2d 362, 307 N.Y.S.2d 970, 973 (1970), aff‘d, 31 N.Y.2d 897, 340 N.Y.S.2d 638, 292 N.E.2d 782 (Ct.App.1972); 18 Am.Jur.2d Corporations § 51. Thus, under the circumstances of the present ease, piercing the corporate veil would be unjustified.
Plaintiff argues that even if the present case does not lend itself to piercing the corporate veil, McClenahan is nonetheless liable for any breach of the employment agreement by Imperial. Mass claims that McClenahan orally agreed to guarantee Imperial’s obligations under the contract, and adds that he later provided McClenahan with a written guarantee for McClenahan’s signature. However, under New York law, a promise to answer for the obligation of another must be in writing and signed by the party to be charged in order to be enforceable. G.O.L. § 5-701(a)(2). Thus McClenahan’s oral guarantee is unenforceable; and since McClenahan never signed the written guarantee submitted to him by Mass, it is unenforceable as well.
Accordingly, McClenahan’s motion for summary judgment dismissing plaintiffs breach of contract claim against him is granted.
SO ORDERED.
Notes
. With respect to all of the issues raised by the defendants except those considered in III. A., below, defendants have moved in the alternative for judgment on the pleadings. Since the court has considered materials outside the pleadings in reaching its decision, defendants’ motion is treated as one for summary judgment rather than for judgment on the pleadings. See Fed.RXiv.P. 12(c).
. Although defendants raise an intriguing question, it is of limited relevance given the facts of this case. Plaintiff contends that he was terminated not only as Imperial‘s attorney, but also as its CEO and president. Thus even if defendants prevailed on the issue they raise, a trial on plaintiff‘s § 1981 claim would still be necessary and would involve almost exactly the same proof.
. As emphasized by Congress when it amended the statute in 1991: “Section 1981 is of particular importance [because] ... [it] is the only federal law banning race discrimination in all contracts. It has been a critically important tool used to strike down racially discriminatory practices in a broad variety of contexts.” H.R.Rep. No. 102-40(11), 102d Congress, 1st Sess. (1991), U.S.Code Cong. & Admin.News 1991 p. 694, available in Westlaw, 1991 WL 87020, at *68.
. In addition to the right of “personal” or “private” association, described in the text, the Supreme Court has “recognized a right to associate for the purpose of engaging in activity protected by the First Amendment — speech, assembly, petition for the redress of grievances, and the exercise of religion.” Roberts, 468 U.S. at 618, 104 S.Ct. at 3249. The present case does not involve this kind of “expressive” association. An attorney and client often collaborate in order to advance shared political or social goals, see, e.g., NAACP v. Button, 371 U.S. 415, 83 S.Ct. 328, 9 L.Ed.2d 405 (1963), but Imperial and Mass did not.
. Defendants made precisely the same argument in support of an unsuccessful summary judgment motion in the parties’ pending suit in the District of Nevada. However, defendants are not collaterally estopped from pressing the same point in this court: since the Nevada district court relied on the existence of factual disputes in denying the defendants’ motion, the court‘s decision was not a “final” one for purposes of collateral estoppel. Kay-R Elec. Corp. v. Stone & Webster Constr. Co., 23 F.3d 55, 59 (2d Cir.1994).
. SCR 158(1) provides:
A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security, or other pecuniary interest adverse to the client unless:
(a) The transaction and the terms of which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in the manner which can reasonably be understood by the client;
(b) The client is given a reasonable opportunity to seek advice of independent counsel in the transaction; and
(c) The client consents in writing.
. Under an ordinary choice-of-law analysis, it appears that Nevada, rather than New York, law would determine whether McClenahan was liable on plaintiff‘s breach of contract claim. However, the parties to a litigation may by their conduct consent to the law to be applied. See Wm. Passalacqua Builders v. Resrtick Developers, 933 F.2d 131, 137 (2d Cir.1991); Walter E. Heller & Co. v. Video Innovations, Inc., 730 F.2d 50, 52 (2d Cir.1984). In the present case, the parties have relied almost exclusively on New York law in their briefs when arguing over McClenahan‘s liability under the contract. See Passalacqua, 933 F.2d at 137; Heller, 730 F.2d at 50. Nevada‘s law is, in any event, similar to that of New York on these issues. Accordingly, the court will apply New York law.