Case Studies

Epstein Becker Green Obtains Victory for Singer’s Personal Manager in Contract Dispute

Epstein Becker Green achieved a victory on behalf of William Brockhaus in his breach-of-contract action against Luis Miguel, a Mexican singer and icon in Latin America.

In August 2011, the defendant invited the plaintiff, a longtime friend, to become his personal manager. The plaintiff agreed, and he and the defendant signed a personal services contract, effective July 1, 2012. The plaintiff quit his job of more than two decades so that he could dedicate himself to the defendant’s career. As a personal manager, the plaintiff helped the defendant cut tour costs, set up new contracts with vendors, and find business opportunities through endorsements and product placement. In February 2015, however, the plaintiff sued the defendant, alleging that the defendant breached their contract by not paying the plaintiff all the agreed amount of money—i.e., 10 percent of the defendant's gross income—for his services between 2012 and 2014.

After the Epstein Becker Green team presented the plaintiff’s case at trial, the U.S. District Court for the Southern District of New York ruled in favor of the plaintiff on his breach-of-contract claim. The court found that the plaintiff and defendant’s contract, which included a “Payments and Commissions” section that entitled the plaintiff to a commission of 10 percent of the defendant's gross income, was in effect from July 1, 2012, through June 30, 2014. Accordingly, in a judgment dated July 9, 2016, the court determined that the defendant owed the plaintiff a commission, attorneys’ fees, and costs totaling more than $1 million.

The Epstein Becker Green team included Jennifer M. Horowitz and Kenneth J. Kelly.

10-Year Retaliation Litigation Ends with Trial Victory—and Counsel Fees—for Hospital

After a decade-long battle, including two trips to the New York State Supreme Court, Appellate Division, Second Department, Epstein Becker Green assisted a client, North Shore – Long Island Jewish Health System (“Hospital”), in obtaining a dismissal in July 2014 of a health care worker’s retaliation suit.

Plaintiff, a highly rated registered nurse manager, alleged that she was fired in 2004 for alerting Hospital management to systemic failures in the Hospital’s surgical instrumentation sterilization department, which she claimed put patients at risk of serious injury or death. She alleged violations of the New York whistleblower law, Lab. Law §740. The Hospital countered that, even though there were documented but isolated instances of unsterile instruments, plaintiff was let go because of her documented inability to “interact” effectually with doctors, Hospital executives, co-workers, and New York State Nurses Association (NYSNA) union representatives.

In a two-week bench trial in Nassau Supreme Court, Epstein Becker Green, on behalf of the Hospital, proved that, notwithstanding several nurses’ testimony regarding unsterile instruments, the Hospital’s procedures complied with New York Department of Health regulations governing surgical services and that plaintiff was fired for reasons unrelated to her reports. Plaintiff tried to bolster her case with the testimony of the former CEO of a Massachusetts hospital group, an MD whom plaintiff claimed was an expert as to the appropriate standards for hospital operations, including addressing issues relating to surgical instruments. Rather than calling its own expert, the Hospital discredited plaintiff’s expert.

In a rarity in employment litigation, the Court awarded the Hospital its attorneys’ fees incurred in defending the case. The Hospital’s fee application was filed with the Court in August 2014.

Epstein Becker Green attorneys Kenneth J. Kelly and Jennifer M. Horowitz represented the Hospital at trial, working with Steven M. Swirsky, who represented the Hospital through discovery, successful motions for summary judgment and to dismiss for failure to prosecute, and the two appeals to the Second Department.

Epstein Becker Green Obtains Dismissal of Discrimination Suit Against Charitable Organization

On May 1, 2013, Epstein Becker Green obtained a summary judgment victory in the U.S. District Court for the Southern District of New York on behalf of a client, one of the largest not-for-profit charitable organizations in New York City.  The litigation was brought by the former Chief Financial Officer ("CFO") of the client who alleged that his termination for performance issues was unlawfully motivated by age and gender bias, as well as retaliation for engaging in a protected activity relating to an adverse employment action.  The former CFO filed a charge with the Equal Employment Opportunity Commission, which was dismissed, and subsequently commenced litigation in federal court.  The plaintiff's complaint asserted violations under Title VII of the Civil Rights Act of 1964, the New York State Human Rights Law, the New York Executive Law, and the New York City Human Rights Law.

The District Court dismissed the case in its entirety based upon the undisputed evidence, which demonstrated that the plaintiff was terminated for legitimate non-discriminatory reasons.  In his decision, Judge Vincent Briccetti noted that there was insufficient evidence from which a reasonable jury could infer discrimination. 

Kenneth J. Kelly and Diana Costantino Gomprecht led the Epstein Becker Green defense team in this litigation.  Forbes v. Lighthouse International, 11 CV 7065, 2013 WL 1811960 (S.D.N.Y. May 1, 2013).

Epstein Becker Green Achieves Twin Victories in Investment Banking Bonus Arbitrations

Epstein Becker Green obtained awards dismissing the claims of nine investment bankers in two arbitrations for bonuses totaling more than $10 million in January and April 2013. Our client, an investment banking firm, had decided as a result of the 2008 crash to award "provisional" bonuses in December 2008 that were subject to adjustment, depending on the firm's then-undetermined audited year-end financial results. Because the firm lost several billion dollars and had to borrow TARP-like funds from the government to maintain its capital requirements, the directors reduced the provisional awards by 90 percent across the board.

The bankers commenced two arbitrations before FINRA for the unpaid balances, claiming breaches of contract and detrimental reliance, on the basis that their particular business units did not contribute to the firm's loss. The firm defended by arguing that, because the bonuses were discretionary, it could properly place decisive weight on its overall performance. Further, the firm argued that the bankers' reliance argument was undermined by layoffs and hiring freezes globally in the financial services industry—a fact confirmed in the bankers' internal emails.

The two panels independently awarded "zero" to the two groups of bankers and dismissed all of the claims. Kenneth J. Kelly and Diana C. Gomprecht led the Epstein Becker Green defense team in both cases.

Epstein Becker Green Wins Dismissal of Lawsuit Seeking Millions in Reimbursement of IRS Penalties, Interest, and Investment Losses

On February 25, 2013, the Supreme Court of the State of New York, New York County, dismissed on summary judgment a complaint brought by an individual whose $35 million deduction for tax shelter losses was disallowed and who sought reimbursement of more than $5 million in Internal Revenue Service ("IRS") penalties, interest on unpaid income tax, and investment losses against an Epstein Becker Green client, a trust company. The plaintiff claimed that our client, among other things, committed a fraud, breached fiduciary duties, and negligently handled his accounts by participating in the tax shelter.

The plaintiff had founded a highly successful video game company and had income of $35 million in 2001 that he wanted to shelter from taxes. He engaged accountants and advisors, and a lawyer from a prominent law firm, who together devised a complex investment structure to create paper losses that involved, among other things, engaging a trust company (Epstein Becker Green's client) simply to administer a pooled investment trust and to handle related paperwork. The structure involved borrowing $35 million from a foreign bank. After the IRS determined the loan to be a sham and the investment losses artificial, it disallowed the loss deductions, and the plaintiff had to pay $13 million in back taxes, $2 million in interest, and $1.3 million in penalties. The lawyer was jailed for tax fraud and the foreign bank entered into a deferred prosecution agreement and paid fines. Having settled with the law firm and several other participants in the shelter, the plaintiff sued our client and the foreign bank that made the "sham" loans.

After extensive discovery of all the sponsors and participants in the tax shelter scheme, the court dismissed the complaint. It held that, because the plaintiff knew or should have known that the tax shelter was risky and because he was complicit in the scheme, he could not have reasonably relied on any alleged fraudulent statements by any of the defendants. Moreover, the proximate cause of the disallowance and the penalties was not the bank's or trust company's actions, but the plaintiff's own participation in a transaction of "doubtful illegality." Hence, all of the plaintiff's breach of contract and fiduciary duty theories were rejected. The court appropriately placed the loss on the plaintiff who stood to benefit from the shelter, and not on anyone else.

Epstein Becker Green attorneys Kenneth J. Kelly and Lori A. Jordan were on the litigation team in New York. Salt Aire Trading LLC v. Enterprise Bank and Trust Corp., S.Ct., N.Y. Co. Index No. 603798/07 (2/25/13).

Second Circuit Affirms Dismissal of Defamation/Breach of Contract Suit Against Epstein Becker Green Medical School Client

In a decision having significance for universities and medical schools, the U.S. Court of Appeals for the Second Circuit upheld the dismissal of a complaint for defamation, discrimination, and breach of contract brought by a medical doctor whose employment was terminated by Mt. Sinai School of Medicine. The plaintiff, a Chinese medical doctor who primarily engaged in cancer research, was accused by one of his subordinates of improperly manipulating research data. After a lengthy formal investigation conducted by a panel of his peers confirmed the allegations, the Dean discharged him, and the dismissal was upheld by a different peer review panel.

The doctor alleged that he was defamed by both the subordinate and the peers, but the court held that all statements made before or during the investigation were qualifiedly protected under the "common interest" privilege, and that the plaintiff had failed to sufficiently allege malice overcoming the privilege. Also, the court held that the plaintiff failed to offer sufficient proof that the dismissal was motivated by anti-Chinese animus, despite comments made about the plaintiff's Chinese medical school training, culture, and background.

Most important for academic institutions, the court reaffirmed the rule in New York that a professor cannot bring a breach of contract law suit arising from discipline, termination, or denial of tenure when such decisions involve peer review decisions under university policies, since such decisions involve weighing the institution's values as well as the individual's contractual rights. Such claims may be brought only by a mandamus-type proceeding where court review of the determination is based on an "arbitrary and capricious" standard.

The Epstein Becker Green team included Kenneth J. Kelly and Jennifer M. Horowitz of the New York office. Chao v. The Mount Sinai Hospital, et al., Index No. 11-1328-cv (2d Cir. 4/17/12).

Epstein Becker Green Obtains Dismissal of ERISA Action Against Health Care Benefits Companies

On March 13, 2012, Epstein Becker Green obtained the dismissal of an action brought by a chiropractic practice group against Aetna Inc. and certain subsidiaries alleging that the defendants breached fiduciary duties imposed by ERISA and tortiously interfered with the practice's patients by not paying for chiropractic treatment they claimed was covered by their patients' employee health benefit plans. Chief Judge Carol Amon of the U.S. District Court in Brooklyn held that although pleaded as such, the breach of fiduciary duty claims were in actuality claims for benefits, and that such claims could be brought only against the benefit plans themselves or the named plan administrator. Since none of the defendants was a plan administrator, but merely rendered "third-party administrator" or claims processing services, they could not be sued under ERISA.

The court also held that if any of the defendants owed any fiduciary duties arising under ERISA, such duties ran to the plans themselves, and plan participants, such as plaintiffs' patients, could not assert such fiduciary breach claims in order to recover any money to cover their own medical expenses.

Lastly, the court held that the plaintiffs' state law claim for interference with the practice's business necessarily included analyzing the patients' claims for benefits, which in turn would involve interpretation of the terms of the benefit plans, and as a result would require examination of rights and obligations created by ERISA. Accordingly, the court held that ERISA preempted the state law claim and the claim was dismissed.

The EBG team representing the defendants was New York Litigation attorneys Kenneth J. Kelly and Diana C. Gomprecht. Staten Island Chiropractic Assoc., PLLC v. Aetna, Inc., 09-CV-2776(CBA) (E.D.N.Y. 3/12/12).

Epstein Becker Green Obtains Dismissal of Major Claims in ‘Excessive Force’ Suit

Epstein Becker Green's litigation team obtained a dismissal of the major claims in an "excessive force" lawsuit brought in federal court by a New York Post newspaper photographer against a major hospital after the reporter was arrested by special patrolmen employed by the hospital. The photographer refused an order to leave the hospital's property (the steps leading to a hospital building) where he was waiting to photograph a celebrity who was planning to visit his brother, a patient. The Court held that, because the First Amendment did not give the photographer the right to enter private property, the order to leave was valid. When he refused, the officers had the right to exercise their state-granted power to arrest him for trespass and resisting arrest. The Court also determined based on video footage captured by several surveillance cameras and the photographer's own audio recording of the incident that there was no genuine issue of material fact and that the officers as a matter of law did not use excessive force, even though the photographer sustained a shoulder injury. Kalfus v. The New York and Presbyterian Hospital, et al., 07 Civ 11455(DAB) (3/31/10).

The Epstein Becker Green team representing the client-hospital included New York Litigation attorney Kenneth J. Kelly.

Epstein Becker Green Obtains $1 Million Judgment for Client in Corporate Dispute

On July 15, 2009, Epstein Becker Green succeeded in obtaining a judgment of more than $1 million for its client. The dispute concerned shareholders of a close corporation.

In 1985, EBG's client received from his brother a gift of stock representing a 70 percent interest in a "Subchapter-S" corporation that his brother utilized to own and manage New York City apartment buildings. Our client set aside the certificate for 20 years. In 1986, the NY Secretary of State dissolved the corporation for failure to pay franchise taxes. The brother waited 90 days and incorporated another entity with the same name as the dissolved corporation and continued business as usual, including buying a building in Harlem in 1987 and selling the other properties in 1988. EBG's client was unaware of these activities. The brother died in 2001, and his wife sold the Harlem building in 2005 for a $1.2 million profit.

In 2006, our client found the stock certificate and asked the wife for his share of the $1.2 million profit. She refused to pay, arguing that our client owned stock only in the first corporation, but the building was bought and sold by the second corporation. Our client sued.

After a bench trial, the New York Supreme Court in Manhattan granted EBG's client 70 percent of the profit from the sale, ruling that the second corporation was a mere continuation of the first. More importantly, the judge agreed with EpsteinBeckerGreen's position that to allow the wife to prevail would encourage shareholders to avoid paying franchise taxes and, when faced with dissolution, merely reincorporate for a few dollars. Such schemes violate public policy.

This case was challenging because the brother had been dead for eight years, our client had no knowledge of the brother's business (neither did the wife), corporate records were non-existent, the wife's son had destroyed all other records of the real estate sale at issue, and most of the corporate activities occurred 20 years ago. Fortunately, EpsteinBeckerGreen found and deposed the lawyer who represented the brother in the 1980s. The lawyer testified that there was no need to transfer title of the first corporation's property to the second corporation in 1986 since "they were the same corporation" and that it was the brother's practice not to pay franchise taxes when it was just as easy and cheaper to reincorporate.

The Epstein Becker Green team representing the client included New York Litigation attorney Kenneth J. Kelly.

Epstein Becker Green Obtains Dismissal of Letter of Credit Action

On July 2, 2009, Epstein Becker Green obtained a dismissal of a suit for $6 million against its client, China Construction Bank Corporation ("CCBC"), one of the largest banks in the People's Republic of China, arising from a letter of credit issued by CCBC. The suit, which was brought in New York Supreme Court, raised novel issues relating to the liabilities of parties to relatively rare "transfer" of letter of credit transactions.

A letter of credit (or "L/C") is used as a financing tool in international trade when an exporter does not want to rely on the creditworthiness of an importer. The L/C is a promise by the importer's bank (the "issuer") that it will pay the exporter of merchandise (the "beneficiary") the price of the merchandise on the receipt of export documents of title showing merely that the goods have been shipped, whether or not the underlying sales actually transaction is performed. Sometimes the exporter's bank will, with the issuer's express permission, "transfer" the L/C to "secondary beneficiaries," who are usually the exporter's subcontractors, to pay them for their part of the manufacture of the merchandise. The issuer will ultimately be responsible for the entire L/C payment if all parties to the transaction follow the international rules governing L/C transactions.

The transaction here involved a shipload of iron ore to be exported from Venezuela to China and a L/C that CCBC had designed as "transferable." The beneficiary of CCBC's L/C directed its New York bank ("Bank M") to transfer $6 million of the $12 million L/C to the steamship owner to pay for the shipping costs. In order to be paid the $6 million, all the steamship owner had to do was fax a "certificate of readiness" to Bank M stating that the vessel had arrived in port to pick up the ore. The owner did just that.

Unfortunately, the exporter seems to have gone out of business and breached the sales contract; there was no ore to be loaded. Nevertheless, under L/C law, because the "certificate of readiness" was all Bank M had specified was needed to obtain payment, Bank M had to pay $6 million unless there were flaws in the documents presented to it. Bank M refused to pay on the transferred L/C. The steamship owner sued CCBC and Bank M for failing to honor the L/C, asserting that because Bank M was CCBC's agent when it transferred the L/C and the owner had established the requirement of the certificate of readiness and presented a proper certificate, CCBC was therefore liable for $6 million.

In a lengthy opinion that explained, in detail for the first time in New York, the rights and obligations of the diverse various parties to "transferred" letters of credit, the court accepted EBG's arguments and granted CCBC's motion for summary judgment dismissing the steamship owner's claim against CCBC, while holding Bank M liable for $6 million. Applying the L/C rules of the International Chamber of Commerce, the court held that Bank M, as the transferring bank, could not bind CCBC by the transfer even though CCBC's L/C expressly permitted transfers. This is because the terms of the transferred L/C varied from the original L/C and Bank M exceeded its authority in transferring the L/C so as to require a certificate of readiness. AP Marine Ltd. v. China Construction Bank Corp., N.Y. Co. Index No 602-517/08.

Kenneth J. Kelly, Victoria Sloan and Jian Hang represented CCBC in the litigation.

Jury Rules for EBG in Defamation Trial

Epstein Becker Green attorneys obtained a jury verdict on November 19, 2008, dismissing a defamation action brought by a former executive against one of New York City's largest hospitals. The action was in federal court in Central Islip, New York.

The plaintiff had been the hospital's Executive Vice President for finance, billing and collections, information technology and strategic planning. He had left the hospital's employ in 2000. Thereafter, the New York Attorney General ("AG") investigated billing for Medicaid patients for services rendered at part-time clinics operated by the hospital and alleged that the hospital fraudulently overbilled the State. The overbilling allegations were settled for more than $75 million in 2005.

As part of the settlement, the AG filed a civil complaint alleging that the hospital had engaged in Medicaid fraud and that certain named individuals, including the plaintiff, were principals in perpetrating the fraud. In addition, the AG required that the hospital provide the AG with a written apology for "misconduct" of unnamed "former executives." The AG announced the settlement in a press release on his office's Web Site, which quoted the apology and linked to the complaint—which, unlike the apology, identified plaintiff by name.

The next day, the AG's press release was reported in the press and plaintiff's name was mentioned in connection with the apology. The plaintiff's then-current employer, another hospital, fired him on the spot, stating publicly that he was fired because of the AG's allegations.

Epstein Becker Green's client was then sued for defamation as a result of the AG's public dissemination of its apology. We defended on the ground that the re-publication of the alleged defamation by the AG did not constitute publication by the hospital. Plaintiff argued that because some of the language of the apology had been drafted by the hospital during negotiations, the publication should be considered at least a joint publication. The jury decided, however, that the hospital's involvement in the drafting process did not constitute a publication by the hospital, and as a result, the plaintiff did not prove a viable defamation claim.

The Epstein Becker Green team included New York Attorneys Kenneth J. Kelly, A. Jonathan Trafimow, and Tracey Cullen.

Epstein Becker Green Successfully Secures Dismissal of Complaint Alleging Breach of Fiduciary Duty

Epstein Becker Green attorneys successfully moved for dismissal of a complaint seeking more the $2.4 million arising from an alleged breach of contract and negligence against Epstein Becker Green client 1740 Advisers Inc. Plaintiffs were two limited-purpose mutual fund trusts and their investment advisor, Diversified Investment Advisors, Inc. Plaintiffs alleged that 1740 Advisers breached its contracts to act as subadvisor for the funds, and acted negligently, by making certain purchases and redemptions of Enron commercial paper during the fall of 2001, just prior to Enron's collapse. The redemptions, which were made just a few days before the maturity dates for the commercial paper, were later alleged by the Enron bankruptcy trustee to be avoidable as improper preferences under several sections of the Bankruptcy Code. Plaintiffs sued 1740 Advisers, after plaintiffs settled with the bankruptcy trustee following years of litigation, for the settlement amount plus attorneys' fees. 1740 Advisers moved to dismiss the complaint.

Epstein Becker Green prevailed with the arguments that the allegations in the complaint were too conclusory to state a claim for breach of contract as to the purchases of the Enron paper in light of 1740 Adviser's contractual discretion to invest on behalf of plaintiffs within specified parameters. As to the sales of the paper back to Enron on the eve of its collapse, Epstein Becker Green contended, and the Court agreed, that 1740 Advisers had discretion to make trades on behalf of Diversified and the funds, and nothing in the complaint showed that 1740 Advisers abused that discretion — even though other entities who sold paper back prior to maturity were ultimately denied summary judgment on their safe harbor claims. The negligence claim was also dismissed as duplicative of the contractual obligations.

The motion was prepared by Epstein Becker Green attorneys Kenneth J. Kelly and Aime Dempsey.