Court Opinion

ID: 7805139
Source: CourtListenerOpinion
Date Created: 2022-08-31 15:00:21.497646+00
Date Added: 2024-06-11T16:29:58.432535
License: Public Domain

21-947
   EVIP Canada, Inc. v. Schnader Harrison Segal & Lewis, LLP

                          UNITED STATES COURT OF APPEALS
                              FOR THE SECOND CIRCUIT

                                       SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION
TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS
GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S
LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH
THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY
CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT
REPRESENTED BY COUNSEL.

         At a stated term of the United States Court of Appeals for the Second Circuit,
   held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the
   City of New York, on the 31st day of August, two thousand twenty-two.

   PRESENT:
                         RICHARD J. SULLIVAN,
                         STEVEN J. MENASHI,
                         BETH ROBINSON,

                         Circuit Judges.
   _____________________________________
   EVIP CANADA, INC., TERRACAP VENTURES,
   INC.,

                             Plaintiffs-Appellants,

                  v.                                           No. 21-947

   SCHNADER HARRISON SEGAL & LEWIS, LLP,
   JOEL HANDEL,

                      Defendants-Appellees.
   _____________________________________
FOR PLAINTIFFS-APPELLANTS:               ANTHONY PRINCI (Frank S. Occhipinti,
                                         on the brief), Stewart Occhipinti, LLP,
                                         New York, NY.

FOR DEFENDANTS-APPELLEES:                HOWARD I. ELMAN (David L. Barres, on
                                         the brief), Elman Freiberg PLLC,
                                         New York, NY.

      Appeal from a judgment of the United States District Court for the Southern

District of New York (Lewis J. Liman, Judge).

      UPON      DUE     CONSIDERATION,          IT   IS   HEREBY      ORDERED,

ADJUDGED, AND DECREED that the judgment of the district court is

AFFIRMED.

      Plaintiffs EVIP Canada, Inc. and Terracap Ventures, Inc. appeal the district

court’s dismissal of their legal malpractice claims against their former attorneys,

Defendants Schnader Harrison Segal & Lewis, LLP and Joel Handel. As relevant

here, Plaintiffs retained Defendants as legal counsel in connection with a joint

venture with Brammo, Inc. to develop technology for electric vehicles. Plaintiffs

allege that Defendants committed legal malpractice by failing to negotiate an

agreement that would have prevented Brammo from later diluting the shares of

preferred stock received by Plaintiffs as part of the joint venture.      Because

Plaintiffs assert that they would not have entered into the joint venture but for

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Defendants’ malpractice, Plaintiffs seek to recover the acquisition costs for the

preferred shares in Brammo and the acquisition and maintenance costs for the

intellectual property and related assets that Terracap assigned to the joint venture

(the “IP Assets”).   The district court granted Defendants’ motion for summary

judgment, concluding that Plaintiffs lacked standing to bring this action and, in

any event, failed to establish all the essential elements of a legal malpractice claim.

We review de novo a district court’s analysis of Article III standing, see Conn.

Citizens Def. League, Inc. v. Lamont, 6 F.4th 439, 444 (2d Cir. 2021), and grant of

summary judgment, see Rubens v. Mason, 527 F.3d 252, 254 (2d Cir. 2008).

      To establish standing under Article III of the Constitution, a plaintiff must

allege an injury in fact that is both “particularized” and “concrete.” Spokeo, Inc.

v. Robins, 578 U.S. 330, 340 (2016). “Particularized” injuries “affect the plaintiff in

a personal and individual way.” Id. at 339 (quoting Lujan v. Defs. of Wildlife, 504

U.S. 555, 560 n.1 (1992)). Concrete injuries are “physical, monetary, or cognizable

intangible harm[s] traditionally recognized as providing a basis for a lawsuit in

American courts.” TransUnion LLC v. Ramirez, 594 U.S. –––, –––, 141 S. Ct. 2190,

2206 (2021).

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      Defendants contend that Plaintiffs did not sustain any monetary injury, and

therefore lack standing to sue, because the cash used to purchase the preferred

shares in Brammo and the IP Assets came from Plaintiffs’ affiliates – including

their principal, Larry Krauss – and not Plaintiffs themselves. But Plaintiffs clearly

allege monetary harm to their private property – the preferred shares in Brammo

owned by EVIP and the IP Assets assigned to the joint venture by Terracap – which

is a sufficient “basis for a lawsuit in American courts.”    TransUnion, 141 S. Ct.

at 2206. Put simply, Plaintiffs assert that Defendants failed to include a minority

approval provision in the agreement they negotiated with Brammo, and failed to

apprise Plaintiffs of that fact, thereby inducing Plaintiffs to execute a transaction

that left EVIP owning preferred shares that were eventually diluted and Terracap

contributing IP Assets that were rendered “essentially worthless.” Pls.’ Br. at 2.

Regardless of the source of the cash used to purchase the preferred shares or the

IP Assets – whether Krauss, a bank, a rich uncle, or lottery winnings – Plaintiffs

have sufficiently alleged an injury in fact that is both “particularized” and

“concrete.” Spokeo, 578 U.S. at 340.

      Defendants alternatively rely on the doctrine of corporate separateness,

arguing that Plaintiffs cannot “reverse-pierce” the corporate veil to sue for

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damages sustained by their affiliates. Defs.’ Br. at 26. But this is really just the

same argument in different clothing.          Again, it is undisputed that Plaintiffs

retained Defendants in connection with the joint venture.              It is equally

undisputed that Plaintiffs owned the preferred shares and IP Assets that were

devalued due to Defendants’ alleged malpractice. Consequently, Plaintiffs need

not pierce the corporate veil to demonstrate an injury in fact, as they are asserting

economic harm to assets that they own, allegedly caused by the malpractice of

counsel that they themselves retained. See TransUnion, 141 S. Ct. at 2206 (stating

that, under Article III’s standing doctrine, a “plaintiff [who] has suffered concrete

harm to her property” can “of course proceed in federal court”).         The district

court therefore erred in finding that Plaintiffs lacked standing to bring this suit.

      We nonetheless affirm the district court’s grant of summary judgment

because Plaintiffs failed to establish that Defendants breached their duty of care

owed to Plaintiffs. To maintain a cause of action for legal malpractice under New

York law, a plaintiff must establish “that the attorney failed to exercise the

ordinary reasonable skill and knowledge commonly possessed by a member of the

legal profession and that the attorney’s breach of this duty proximately caused

                                          5
plaintiff to sustain actual and ascertainable damages.” Dombrowski v. Bulson, 19

N.Y.3d 347, 350 (2012) (internal quotation marks omitted).

      Plaintiffs offer two main theories of breach.    First, Plaintiffs claim that

Defendants should have negotiated and secured for them a minority approval

provision in the closing documents to neutralize the majority shareholders’ ability

to waive any anti-dilution protection. Second, Plaintiffs claim that absent such a

minority approval provision, Defendants should not have advised them that the

closing documents were “ok” to sign. J. App’x at 1456. But the record shows

that Plaintiffs understood the implications of a minority approval provision, that

they were aware that the closing documents lacked such a provision, that they

asked Brammo directly for a minority approval provision three days before

closing, that Brammo declined their request, and that Plaintiffs nevertheless

remained eager to close the transaction. Under these circumstances, it cannot be

said that Defendants breached their duty of care by (1) not making the same

request that Plaintiffs had already made, and which Brammo had already

declined; or (2) not reminding Plaintiffs of what they obviously already knew.

See Hall Dickler Kent Goldstein & Wood v. Coleman, 798 N.Y.S.2d 375, 376 (1st Dep’t

2005) (a legal malpractice claim should not be a “stratagem to shift the blame” for

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a party’s error in judgment onto its counsel). The district court therefore did not

err in granting summary judgment on Plaintiffs’ malpractice claims.

       We have considered all of Plaintiffs’ remaining arguments and have found

them to be without merit. For the foregoing reasons, we AFFIRM the judgment

of the district court.

                                      FOR THE COURT:
                                      Catherine O’Hagan Wolfe, Clerk of Court

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