SUPREME COURT OF THE STATE OF NEW YORK · PDF fileSEVENTH: Denies knowledge or information...

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SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK

CHRISTOPHER A. HUGHES, ESQ. X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . : Index No. 602979/08

Plaintiff, : ANSWER

- against -

MORGAN & FINNEGAN, LLP,

Defendant Morgan & Finnegan, L.L.P., by its attorneys, Wilson, Elser, Moskowitz,

Edelman & Dicker LLP, as and for it Answer to the Verified Complaint dated October 15,2008

(the “Complaint”), responds as follows:

ANSWERING FACTS COMMON TO ALL CAUSES OF ACTION

FIRST: Denies knowledge or information sufficient to form a belief as to the

truth or falsity of the allegations in paragraph “1” of the Complaint.

SECOND: Denies knowledge or information sufficient to form a belief as to the


THIRD: Admits the allegations in paragraph “3” of the Complaint.

FOURTH: Denies knowledge or information sufficient to form a belief as to the


FIFTH: Denies knowledge or information sufficient to form a belief as to the


SIXTH: Admits the allegations in paragraph “6” of the Complaint.

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SEVENTH: Denies knowledge or information sufficient


to form a belief as to the

EIGHTH:

NINTH:

Admits the allegations in paragraph “8” of the Complaint.

Denies knowledge or information sufficient to form a belief as to the


TENTH: Denies the allegations in paragraph “1 0” of the Complaint.

ELEVENTH: Denies knowledge or information sufficient to form a belief as to the

truth or falsity of the allegations in paragraph “1 1” of the Complaint.

TWELFTH: Denies knowledge or information sufficient to form a belief as to the


THIRTEENTH: Denies knowledge or information sufficient to form a belief as to the


FOURTEENTH: Denies knowledge or information sufficient to form a belief as to the


FIFTEENTH: Denies knowledge or information sufficient to form a belief as to the

truth or falsity of the allegations in paragraph “1 5” of the Complaint.

SIXTEENTH: Denies the allegations in paragraph “16” of the Complaint.

SEVENTEENTH: Admits the allegations in paragraph “17” of the Complaint.

EIGHTEENTH: Denies the allegations in paragraph “1 8” of the Complaint.

NINETEENTH: Denies the allegations in paragraph “19” of the Complaint.

TWENTIETH: Admits the allegations in paragraph “20” of the Complaint.

TWENTY-FIRST: Admits the allegations in paragraph “21” of the Complaint to the

extent that paragraph “2 1” accurately recites excerpted language.

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TWENTY-SECOND: Denies the allegations in paragraph “22” of the Complaint to the

extent that paragraph “22” accurately recites excerpted language.

TWENTH-THIRD: Admits the allegations in paragraph “23” of the Complaint.

TWENTY-FOURTH: Admits the allegations in paragraph “24” of the Complaint to the

extent that paragraph “24 accurately recites excerpted language.

TWENTY-FIFTH: Admits the allegations in paragraph “25” of the Complaint.

TWENTY-SIXTH: Denies knowledge or information sufficient to form a belief as to the

truth or falsity of the allegations in paragraph “26” of the Complaint. *

TWENTY-SEVENTH: Denies the allegations in paragraph “27” of the Complaint.

TWENTY-EIGHTH: Admits the allegations in paragraph “28” of the Complaint.

TWENTY-NINTH: Admits the allegations in paragraph “29” of the Complaint.

THIRTIETH: Denies knowledge or information sufficient to form a belief as to the truth

or falsity of the allegations in paragraph “30” of the Complaint.

THIRTY-FIRST: Denies knowledge or information sufficient to form a belief as to the


THIRTY-SECOND: Denies knowledge or information sufficient to form a belief as to

the truth or falsity of the allegations in paragraph “32” of the Complaint.

ANSWERING FIRST CAUSE OF ACTION

THIRTY-THIRD: In response to paragraph “33” of the Complaint, defendant repeats

and re alleges each of his responses to paragraphs 1 through 32 as if alleged at length herein.

THIRTY-FOURTH: Denies the allegations in paragraph “34” of the Complaint.

THIRTY-FIFTH: Denies the allegations in paragraph “35” of the Complaint.

THIRTY-SIXTH: Denies the allegations in paragraph “36” of the Complaint.

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THIRTY-SEVENTH: Denies the allegations in paragraph “37” of the Complaint.

ANSWERING SECOND CAUSE OF ACTION

THIRTY-EIGHTH: In response to paragraph “38” of the Complaint, defendant repeats


THIRTY-NINTH: Denies the allegations in paragraph “39” of the Complaint.

FORTIETH: Denies the allegations in paragraph “40” of the Complaint.

FORTY-FIRST: Denis the allegations in paragraph “41” of the Complaint.

FORTY-SECOND: Denies the allegations in paragraph “42” of the Complaint.

FORTY-THIRD: Denies the allegations in paragraph “43” of the Complaint.

FORTY-FOURTH: Denies the allegations in paragraph “44” of the Complaint.

FORTY-FIFTH: Denies the allegations in paragraph “45” of the Complaint.

ANSWERING THIRD CAUSE OF ACTION

FORTY-SIXTH: In response to paragraph “46” of the Complaint, defendant repeats and

re alleges each of his responses to paragraphs 1 through 45 as if alleged at length herein.

FORTY-SEVENTH: Denies knowledge or information sufficient to form a belief as to

the truth or falsity of the allegations in paragraph “47” of the Complaint.

FORTY-EIGHTH: Denies knowledge or information sufficient to form a belief as to the


FORTY-NINTH: Denies the allegations in paragraph “49” of the Complaint.

FIFTIETH: Denies the allegations in paragraph “50” of the Complaint.

FIFTY-FIRST: Denies the allegations in paragraph “51” of the Complaint.

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ANSWERING FOURTH CAUSE OF ACTION

FIFTY-SECOND: In response to paragraph “52” of the Complaint, defendant repeats

and re alleges each of his responses to paragraphs 1 through 5 1 as if alleged at length herein.

FIFTY-THIRD: Admits the allegations in paragraph “53” of the Complaint.

FIFTY-FOURTH: Denies the allegations in paragraph “54” of the Complaint.

FIFTY-FIFTH: Denies knowledge or information sufficient to form a belief as to the


FIFTY-SIXTH: Denies the allegations in paragraph “56” of the Complaint.

ANSWERING FIFTH CAUSE OF ACTION

FIFTY-SEVENTH: In response to paragraph “57” of the Complaint, defendant repeats


FIFTY-EIGHTH: Admits the allegations in paragraph “58” of the Complaint.

FIFTY-NINTH:

SIXTIETH:

Denies the allegations in paragraph “59” of the Complaint.

Denies the allegations in paragraph “60” of the Complaint.

AFFIRMATIVE DEFENSES

First Affirmative Defense

SIXTY-FIRST: The Complaint fails to state a claim upon which relief can be granted.

Second Affirmative Defense

SIXTY-SECOND: The Complaint is barred by the New York Statute of Frauds

andor the General Obligations Law.

Third Affirmative Defense

SIXTY-THIRD: The Complaint is barred by the doctrine of unclean hands.

Fourth Affirmative Defense

The Complaint is barred by release. SIXTY-FOURTH:

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Fifth Affirmative Defense

SIXT'J .FIFTH:Upon information and belief, if plaintiff sufferec. or sustained any loss,

damage or injury as alleged in the Complaint such damages were the direct and proximate

result of his own conduct.

Sixth Affirmative Defense

SIXTY -SIXTH: Upon information and belief, defendant's liability, if any, is

limited and governed by the provisions set forth in Article 14 of the CPLR.

Seventh Affirmative Defense

SIXTY-SEVENTH: Upon information and belief, defendant's liability, if any, is

limited and governed by the provisions set forth in Article 16 of the CPLR.

Eighth Affirmative Defense

SIXTY-EIGTH: This matter should be dismissed in favor of enforcement of the

contract provision requiring arbitration of any dispute between plaintiff and defendant.

Ninth Affirmative Defense

SIXTY-NINTH: This matter should not proceed for plaintiffs failure to join all

necessary parties.

AS AND FOR COUNTER CLAIMS

SEVENTIETH: In or about June and July of 2007, Morgan & Finnegan was exploring

ways in which to protect the firm including exploring ways to discourage departure from the

firm by revising the partnership agreement dated as of January 1, 1995 (the "2005

Agreement").

SEVENTY-FIRST: Prior to August 13,2007, drafts of the proposed revisions to the

2005 Agreement were circulated among Morgan & Finnegan partners, including plaintiff.

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SEVENTY-SECOND : On or about August 9,2007, plaintiff had a telephone

conversation with a member of the Morgan & Finnegan executive committee where it was

communicated to plaintiff that it was likely that the 2005 Agreement would be revised at the

upcoming partnership meeting.

SEVENTY-THIRD: By e-mail dated August 12,2007, plaintiff gave authority to his

then partner to vote by proxy against the proposed revisions to the 2005 Agreement.

Specifically, plaintiff instructed his proxy to (1) vote against the proposed draft of the new

partnership agreement as circulated to the partnership, (2) vote againstmy motion to waive the

14-day notice for any amendments that may be proposed for the partnership agreement, (3)

vote against each of the additional proposed changes circulated amongst the partnership by

email dated August 10, and (4) vote against (i) any change to the management book method of

calculating partner capital, (ii) any proposal which would eliminate any partner from sharing in

contingency recoveries, (iii) any new provision regarding notice required prior to a vote to alter

the partnership agreement, and (iv) any other proposal that would create disincentives for any

partner whether they be active, retired or resigned.

SEVENTY-FOURTH: The 2005 Agreement states in relevant part: "7(a) Except where

expressly provided otherwise hereinafter any changes or amendments to the terms of this

Agreement may be made only by the affirmative action of a majority of the partners at a

meeting of the partnership held after fifteen (1 5 ) days written notice of the proposed changes or

amendments and the meeting date has been given, unless such notice shall have been waived by

a vote of the holders of at least two-thirds (2/3) of the outstanding units of participation as

assigned in Paragraph No. 6 herein,. . .I'

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SEVENTY-FIFTH: On August 13,2007, a meeting of the Morgan & Finnegan

partnership was convened and by a majority vote, the Morgan & Finnegan partnership duly

voted to amend the 2005 Agreement in full accord with and the 2005 Agreement and in

particular Paragraph 7(a).

SEVENTY-SIXTH: As of August 13,2007, the operative partnership agreement

became the agreement entitled the "2007 Partnershp Agreement" (hereinafter "2007

Agreement"). The partnership of Morgan & Finnegan duly voted to enact section 13(b) of the

2007 Agreement which provides that a partner who withdraws andlfails to give proper notice I

can be obligated to relinquish any bonus monies paid within the twelve months preceding upon

a vote of two-thirds of the partnership units.

SEVENTY-SEVENTH: The 2007 Agreement dictates, inter alia, that (1) the capital

account of a withdrawing partner such as plaintiff would be computed according to the Tax

Basis and not the Management Book method; (2) a withdrawing partner such as plaintiff is no

entitled to receive benefit of any deferred or contingent fee paid to Morgan & Finnegan; (3) any

dispute regarding the 2007 Agreement would be submitted to arbitration and (4) a withdrawing

partner such as plaintiff may be obligated in certain circumstances to relinquish any bonus

monies received withm 12 months preceding the date of withdrawal.

SEVENTY-EIGHTH: On or about August 16,2007, plaintiff resigned from Morgan &

Finnegan.

SEVENTY-NINTH: Plaintiff did not provide sufficient notice of his resignation.

EIGHTIETH: Since some time prior to plaintiffs resignation, the 2007 Agreement has

been the operative partnership agreement at Morgan & Finnegan. The rights, obligations and

terms of plaintiffs withdrawal from Morgan & Finnegan is determined by the 2007 Agreement.

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EIGHTY-FIRST: The rights and obligations as between plaintiff and Morgan &

Finnegan are determined by the 2007 Agreement.

EIGHTY-SECOND: Upon information and belief, plaintiff knew that the 2005

Agreement was going to be amended and replaced with the 2007 Agreement. Plaintiff resigned

fi-om the firm as quickly as he could in an unsuccessful attempt to avoid the 2007 Agreement

because, upon information and belief, he knew that the very arguments plaintiff asserts in this

litigation are wholly precluded by the plain, unambiguous terms of the 2007 Agreement.

EIGHTY-THIRD: Plaintiff opposed amending the 2007 Amendment because it created

several disincentives to withdrawing as a partner fiom Morgan & Finnegan. In the past,

plaintiff accepted modifications to the 2005 Agreement when it benefited plaintiff. Plaintiff

cannot pick and choose among the partnership agreements and modifications thereto.

EIGHTY-FOURTH: Over plaintiffs opposing vote, the 2007 Agreement was

implemented by the Morgan & Finnegan partnership. Plaintiffs disapproval of the 2007

Agreement does not entitle him to be governed by the 2005 Agreement.

EIGHTY-FIFTH: Plaintiffs reliance on the 2005 Agreement is without basis.

EIGHTY-SIXTH: Plaintiffs capital contribution was properly calculated according to

the Tax Method.

EIGHTY-SEVENTH: Plaintiff is not entitled to any share of contingency fees

recovered by Morgan & Finnegan.

EIGHTY-EIGHTH: The Morgan & Finnegan partnership duly voted pursuant to

paragraph 13@) of the 2007 Agreement to rescind the bonus awarded to plaintiff in or about

January 2007. Plaintiff is required to return his bonus awarded in or about January 2007 which

was approximately $275,000.

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EIGHTY-NINTH: Plaintiff was obligated to pursue any dispute with respect to the

2007 Agreement in an arbitration.

FIRST COUNTERCLAIM: BREACH OF CONTRACT

NINETIETH: Plaintiff was obligated to adhere to the 2007 Agreement.

NINETY-FIRST: For the reasons stated above, plaintiff violated the 2007

Agreement by initiating this meritless litigation in lieu of an arbitration as is required by the

2007 Agreement.

NINETY-SECOND: Plaintiff has breached the terms of the 2007 Agreement Morgan .

& Finnegan has suffered damages thereby in an amount that has not been quantified.

SECOND COUNTERCLAIM: BREACH OF CONTRACT

NINETY-THIRD: The 2007 Agreement recites that a partner may withdraw from

Morgan & Finnegan at any time upon not less than 30-days written notice.

NINETY-FOURTH: Plaintiff breached his obligation to provide 30-days notice of his

intent to withdraw.

NINETY-FIFTH: Under the terms of the 2007 Agreement, because of his breach in

failing to provide sufficient notice of hs intent to withdraw as a partner, plaintiff must return

the $275,000 bonus awarded in January 2007.

NINETY-SIXTH: For his failure to provide notice and failure to return his $275,000

bonus, plaintiff has breached the 2007 Agreement causing damages to Morgan & Finnegan in

an amount that has not been quantified but is at least $275,000.

THIRD COUNTERCLAIM: MONEY HAD AND RECEIVED

NINETY-SEVENTH: Plaintiffs refusal to return the $275,000 bonus awarded to him is

a violation of his contractual, fiduciary and legal duties to Morgan & Finnegan.

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NINETY-EIGHTH: Accordingly, plaintiff is liable for his breaches to Morgan &

Finnegan and has caused damages to Morgan & Finnegan in an amount that has not been

quantified but is at least $275,000.

WHEREFORE, defendants demand judgment against plaintiff as follows:

(a) Dismissal of the Complaint in its entirety;

(b) Relief on the first, second and third counterclaim causes of action;

(c) For damages in the s u m to be determined at trial but believed to be in excess of

$275,000;

(d) Interest, costs and reasonable attorney’s fees as permitted by law or statute; and

(e) Such other and further relief as this Court deems just and proper.

Dated: New York, New York November 21,2008

By:

Richard B. Porter Attorneys for Defendant/Counterclaimant Morgan h Finnegan, LLP 150 East 42nd Street New York, New York 10017-5639

File No. 01846.00044 (212) 490-3000

TO: FRANKFURT KURNIT KLEIN & SELZ, P.C. Attorneys for Plaintiff 488 Madison Ave. New York, NY 10022 212-980-0 120

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VERIFICATION

STATE OF NEW YORK )

COUNTY OF NEW YORK ) ) ss.:

JOHN SWEENEY, being duly sworn, deposes and states as follows:

I am member of Morgan & Finnegan, LLP and I have read the foregoing

Verified Answer and know the contents thereof; and the same is true to my knowledge except

as to the matters therein stated upon information and belief, and, as to those matters, I believe

them to be true. The grounds for my belief as to all matters not stated upon personal

knowledge is a review of the file in my possession.

Sworn to before me this A

3 /,& day of November, 2008

BEITINA MARIA MIRAGUA Notary Publlc, State of New York

No. 034974913 Qualified In Bronx County

Certfficate flled In New York County Commission Expires November 26, +W. 9 6 16.

33921 88.2 - 12-


. - 1

I . , ’

AFFIDAVIT OF SERVICE

STATE OF NEW YORK )

COUNTY OF NEW YORK ) )ss.:

ANN MARIE COUGHLIN, being duly sworn, deposes and says: that deponent is not a party to the action, is over 18 years of age and resides in Kings County, New York.

That on the 21st day of November, 2008, deponent served the within Answer upon:

FRANKFURT KURNIT KLEIN & SELZ, P.C. Attorneys for Plaintiff 488 Madison Ave. New York, N Y 10022 2 12-980-0 120

at the address designated by said attorney(s) for that purpose by depositing a true copy of

same enclosed in a properly addressed wrapper via Rabbit Messenger Service

Ann Mane Coualin fl

Sworn to before me this 2 1 st day of November 2008

Notary Public

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Index No. 602979/08 Thomas W. Hyland and Richard B. Porter 01846.00044

SUPREME COURT OF THE STATE OF NEW YORK I COUNTY OF NEW YORK

CHRISTOPHER A. HUGHES, ESQ.

Plaintiff(s),

-against-

MORGAN & FINNEGAN, LLP ’

Defendant(s).

ANSWER

WILSON, ELSER, MOSKOWITZ, EDELMAN & DICKER LLP

Attorneys For Defendant

150 East 42nd Street New York, NY 10017-5639

2 12.490.3000

Dated, New York, New York tdn\ramhar 91 qnnn


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