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IN THIS BREACH OF CONTRACT SUIT CONCERNING SHARING ATTORNEY’S FEES, THE COMPLAINT DID NOT ALLEGE SUFFICIENT FACTS TO STATE A CAUSE OF ACTION AGAINST AN INDIVIDUAL ATTORNEY, AS OPPOSED TO THE ATTORNEY’S FIRM (SECOND DEPT). ​

The Second Department, in this breach of contract action, determined the complaint did not allege sufficient facts to state a cause of action against an attorney (Lefft) as an individual, as opposed to against the attorney’s law firm:

“As a general rule, the law treats corporations as having an existence separate and distinct from that of their shareholders and, consequently, will not impose liability upon shareholders for the acts of the corporation” ( … Business Corporation Law § 1505). “In order for a plaintiff to state a viable claim against a shareholder of a corporation in his or her individual capacity for actions purportedly taken on behalf of the corporation, [the] plaintiff must allege facts that, if proved, indicate that the shareholder exercised complete domination and control over the corporation and ‘abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice'” … .

Here, while the complaint alleged that Leftt had authority to make decisions on behalf of the firm, and that Leftt “ratified” both that the plaintiffs held an “of counsel” position with the firm, as well as the compensation arrangement … , the complaint does not allege that Leftt exercised “complete dominion and control over” the firm, or otherwise “abused the privilege of doing business in the corporate form” that would form the basis for personal liability … . Hymowitz v Hoang Q. Nguyen, 2022 NY Slip Op 05997, Second Dept 10-26-22

Practice Point: To assert that a shareholder is personally liable for the conduct of the corporation (here a law firm), the complaint must allege the shareholder exercised complete dominion and control over the corporation.

 

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