New York Miscellaneous Reports

Unpublished

CONNOLLY v. HAN-TSIEN TUAN, 602768 (2006) 2006 NY Slip Op
51158(U), 820 N.Y.S.2d 842 KERRY CONNOLLY, Plaintiffs, v.
HAN-TSIEN TUAN, DEAN CHO, TUAN & CHO, LLP, and TUAN,
CONNOLLY & CHO, LLP, Defendants. 602768/05. Supreme Court
of the State of New York. New York County. Decided June
23, 2006.

[EDITOR’S NOTE: This case is unpublished as indicated by the
issuing court.] Kerry Connolly, Esq., Plaintiff Pro Se and
James Sandnes, of counsel New York, New York, for
Plaintiff.

Tuan & Cho, LLP, by: Dean T. Cho, New York, New York, for
Defendants.

BERNARD J. FRIED, J.

This action involves disputes between an attorney and her
former law firm, her former partners and a new firm created
by the former partners. The parties had previously settled
their disputes by way of agreement, one arranging for an
organized departure from the firm of Plaintiff, Kerry
Connolly (“Connolly”), and requiring Defendants to make
certain periodic payments to Connolly. But, the settlement
agreement itself gave rise to even more disputes.

Defendants claim that, among other things, Plaintiff,
Kerry Connolly, failed and refused to return to Defendants,
as required in the settlement agreement, certain electronic
files held on Connolly’s laptop computer. After making the
first two payments, Defendants ceased making periodic
payments to Connolly.

Connolly promptly brought the dispute before me by way of
an Order to Show Cause, in which she explained that she had
provided Defendants with hard copies of most of the
electronic files, but that her hard drive “crashed” a few
days after execution of the settlement agreement and after
a technician hired by Defendants serviced Connolly’s
laptop. The damaged hard drive is the property of Connolly,
and, in addition to several files belonging to Defendants,
contains privileged documents from attorney-client
relationships entered into by Connolly before joining
Defendants’ firm and confidential information personal to
Connolly and her husband. Connolly argues that hard copies
of the electronic files were sufficient to satisfy her
obligations under the settlement agreement, and that she
did not repudiate her obligations under the agreement.
Connolly admits that her hard drive may hold copies of
certain electronic documents belonging to Defendants.

There also was a dispute as to whether the Defendants
breached the agreement by discontinuing Connolly’s internet
access during November 2005. The agreement required
Defendants to provide Connolly with access to her office
during that month.

I referred the dispute to a Special Referee to hear and
report. After attempted mediation, Special Referee
Lowenstein heard the parties and issued a report and
recommendation. Connolly moved to modify and confirm the
report and recommendation (Motion Sequence No. 003),
submitting papers on her motion and appearing for argument
on May 18, 2006 at the scheduled time. Defendants submitted
papers in opposition to the motion, but failed to appear
for argument. I granted Connolly’s motion on default.

Pursuant to CPLR §§ 2001, 2005, and
5015(a)(1), Defendants now move (Motion Sequence #004) to
vacate the default judgment granted against them on May 18,
2006. Defendants claim that, through no fault of their own,
they failed to receive timely notice of the date and time
of the appearance. Defendants offer printed copies of a
report generated by the Future Court Appearance System, a
report listing all of their firms’ appearances for May 18,
2006. This matter does not appear on that list.

They argue that the default should be excused or
disregarded because it resulted from a mistake, it causes
no prejudice to Plaintiff and there are valid defenses to
the underlying motion to modify and confirm.

Connolly opposes the motion to vacate and cross-moves to
enter judgment, contending that Defendants had sufficient
notice of the hearing through either the CourtAlert or
Future Court Appearance System; and, therefore, Defendants’
failure to appear was not excusable. Plaintiff also argues
that Defendants’ defenses bear no merit. Connolly notes
that the May 18, 2006 argument may be found on the Future
Court Appearance System if a search is performed under the
name and index number of the action rather than by firm
name, as Defendants had executed their search.

During argument on the motion to vacate, I expressed my
inclination to grant the motion to vacate and also heard
argument on the underlying motion to modify and confirm the
report and recommendation of the referee.

The default order issued in Motion Sequence #003 is hereby
vacated and Connolly’s cross-motion to enter judgment is
denied as moot. I now turn to the merits of the motion to
modify and confirm the report and recommendation of the
referee.

By order dated December 19, 2005, I referred the following
issues to a Special Referee to hear and report:

1. Did defendants fail to make certain required payments
to the plaintiff on November 15, 2005, December 1, 2005
and December 15, 2005?

2. Was plaintiff obligated to provide defendants with
electronic copies of documents the plaintiff created on
her personal laptop computer as a precondition to the
receipt of payments from the defendant?

3. Is the plaintiff required to provide her hard drive
without restriction to defendants and if so should the
plaintiff pay the cost of data restoration or can the hard
copies filed in court suffice in this regard?

4. Was the plaintiff under the settlement agreement
obligated to provide defendants with copies of all
documents in cases she worked on for defendants, either
hard copies or electronic copies including all
correspondence she prepared and received in the cases,
without the need for duplication?

5. Whether the plaintiff repudiated an agreement between
the parties by asserting that she had no obligation to
provide the documents?

6. The extent that the plaintiff’s access to the internet
at the defendants’ office after November 1, 2005 affected
the parties’ settlement agreement?

The Special Referee held a hearing on February 8, 2006,
where both parties offered exhibits, including copies of
the settlement agreement, and testimony from Kerry Connolly
and Han-Hsien Tuan. On March 27, 2006, the Special Referee
issued a report and recommendation, in which he found that
(1) Defendants failed to properly make payments required
under the agreement; (2) Connolly retains possession of the
hard drive from her laptop computer and the laptop computer
may contain electronic files which are the property of
Defendants; (3) Connolly need not grant unrestricted access
to any recoverable files from the hard drive but is
required to provide to Defendants all electronic files in
her possession that are the property of Defendants; (4)
Connolly should pay the cost of any attempt to recover data
from the drive; (5) Connolly did not repudiate the
settlement agreement; and (6) discontinuance of internet
service did not constitute a breach of the settlement
agreement.

The Special Referee then recommended that a Special Master
be assigned to the case and that Defendants be ordered to
pay all money owed to Connolly into an escrow account
opened by the Special Master. In addition, Connolly should
turnover to the Special Master the hard drive, and the
Special Master should hire a third-party to determine
whether any data could be restored from the drive, review
any files recovered from the drive and return to Defendants
any files belonging to them.

In her motion to modify and confirm, Connolly agreed with
most of the Special Referee’s findings, including the
finding that Defendants had improperly withheld payment
under the settlement agreement. However, Connolly argues
that the report and recommendation should be modified to
eliminate the need for a Special Master. She contends that
Defendants should be ordered to make payments directly to
her, rather than to an escrow account, and that, if any
data is recoverable from the hard drive, she should review
the data to determine which files are the property of
Defendants and return them accordingly. She contends that
the settlement agreement should be enforced according to
its terms, and the settlement agreement possesses no
requirement for a Special Master or other third-party to
govern the making of payments or the return of files.

Also, Connolly disagrees with the Special Referee’s
finding that she should bear the cost of data restoration,
but is willing to bear the cost so long as she receives the
withheld payments and interest calculated from the dates
those payments were due.

Arguing that the Special Referee’s findings are
inconsistent with the evidence and the law, Defendants ask
me to reject the report and recommendation, find that
Connolly repudiated the agreement and award Defendants
damages for Connolly’s breach of the settlement agreement.
Despite the fact that Connolly returned to Defendants all
physical documents and hard copies of most of the
electronic documents, Defendants argue that she forfeited
any rights to payment under the agreement because she
failed to turn over all of the firms’ electronic files.
They argue that her initial opposition to returning
electronic documents constituted a repudiation of the
agreement. And, at oral argument held on June 19, 2006,
Defendants presented another theory to support their
contention that Connolly forfeited her benefits under the
settlement agreement — that she bore the risk of loss
on her obligation to return the firm’s intangible property.

On a motion to confirm a referee’s report, a court should
confirm if the record substantially supports the referee’s
findings. (Baker v. Kohler, 28 AD3d 375, 375 [1st Dep’t
2006]; Thomas v. Thomas, 21 AD3d 949, 949-50 [2d Dep’t
2005]). Courts have the power to confirm or reject, in
whole or in part, the findings and recommendations of a
referee. (See Barrett v. Stone, 236 AD2d 323, 323-24 [1st
Dep’t 1997]; Garrick-Aug Associates Store Leasing, Inc. v.
Shefa Land Corp., 270 AD2d 68, 69 [1st Dep’t 2001]).

Here, the record substantially supports the referee’s
findings that Defendants had an obligation to make the
payments specified in the agreement, that Connolly had an
obligation to return to Defendants any electronic files in
her possession, that Defendants had no right to
unrestricted access to the drive, and that discontinuance
of Connolly’s internet access did not breach the agreement.
The settlement agreement clearly describes when and how
Defendants were to make payments to Connolly, and they had
no right to the self-help remedy of stopping payments. In
addition to a reimbursement of $4,074.41, Defendant Tuan,
Connolly & Cho, LLP was required to make bi-monthly payments
of $3,833.34 beginning November 1, 2005 and ending October
15, 2006. Defendant Han-Hsien Tuan was required to pay
Connolly $5,000 by December 31, 2005 and $3,000 by March
31, 2006. Of these payments, Connolly received only the
$4,074.41 reimbursement and the first two of the bi-monthly
payments of $3,833.34, and, during the Special Referee’s
hearing Defendants admitted to making no further payments.
No payments have been made since that hearing.

Furthermore, the record substantially supports the
referee’s finding that Connolly must return all of
Defendants’ electronic files in her possession. The
agreement states that Connolly must return all of the
firm’s property, including “tangible and intangible”
property. Because this obligation lies with her, the
referee found that she should bear the cost of returning
the files, including the cost of attempting recovery of any
files remaining on the hard drive. The referee also
properly found no evidence of repudiation by Connolly.

However, I do not find evidence in the record to support
the referee’s recommendation that a Special Master be
appointed to hold in escrow Defendants’ payments and to
govern recovery and review of the files on the damaged hard
drive. The terms of the settlement agreement are clear and
unambiguous, and they do not require the parties to make
payments into escrow or retain a third-party to supervise
the making of payments and the return of files.

Defendants should make payments directly to Connolly, as
required by the agreement, and Connolly should attempt to
recover files from her hard drive and, if successful,
return any recovered files that belong to the Defendants.
The expense and complication of a Special Master is not
necessary for the parties to fully perform their
contractual obligations.

Connolly seeks to recover from Defendants the sum of
$56,317.24, representing a portion of a client retainer fee
and the bi-monthly payments remaining unpaid through June
15, 2006, and $8,222.41, representing the amount owed by
Han-Hsien Tuan. Both sums also include interest calculated
from the dates upon which the underlying payments were due,
as specified in the settlement agreement.

I confirm that part of the report and recommendation
finding that Defendants failed to make payments as required
under the agreement, that Connolly did not repudiate the
agreement, that Connolly had an obligation to return to
Defendants their electronic documents, and that Defendants
did not breach the agreement by discontinuing Connolly’s
internet access. Furthermore, I find that Connolly has
correctly calculated the amounts owed to her but unpaid by
Defendants. I reject that part of the report and
recommendation requiring the appointment of a Special
Master to hold in escrow Defendants’ payments and supervise
the recovery and review of files from the hard drive.

At argument held on June 19, 2006, I ordered Connolly to
send to me, by letter, a list of three data-recovery
service providers capable of attempting to recover data
from the damaged hard drive and including quotations of the
cost of recovery attempt. By letter dated June 21, 2006,
Connolly provided such a list. The service provider with
the lowest fee, Best Buy/The Geek Squad (“Best Buy”) quoted
a flat fee of $199.00 during a telephone conversation with
Connolly held on June 20, 2006. Connolly explained that she
could hand-deliver the drive to Best Buy and provided a
copy of the company’s general website, which identifies the
various services offered by the company but does not
specifically address its data recovery services.

The second provider charged a minimum fee of $175.00 for
evaluation of the drive and a fee of $1050 in the case of
successful data recovery. The third provider quoted a price
range, from $299-$1499, depending on the complexity of the
damage. In her letter, Connolly suggests that I choose the
lowest cost data-recovery service provider.

Defendants, by letter dated June 21, 2006, opposed
selection of the lowest cost provider, arguing that the
difference in price quotations indicated poor service, lack
of proper training and lack of expertise in data recovery.
In part, Defendants base their theory on language on Best
Buy’s website that describes its personnel as “mobile,
badge-toting individuals.”

Upon review of these letters, and the attached exhibits, I
find that Best Buy is a satisfactory data-recovery service
provider and reject Defendants arguments in opposition.
Defendants arguments are based solely on the information
contained on Best Buy’s homepage, information not directly
relevant to data-recovery services, and the difference in
price quotations. Even though there is difference between
the various price quotations, the price quoted by Best Buy
is not so dissimilar from those of the other provider to
justify Defendants concern. In fact, Best Buy’s quotation
is close to the lower end of the various prices quoted by
the other providers.

Accordingly, it is

ORDERED that defendants motion to vacate (Motion Sequence
#004) is granted and my order of May 18, 2006 is hereby
vacated; and it is further

ORDERED that Kerry Connolly’s cross-motion to enter
judgment is denied as moot; and it is further

ORDERED that the motion to modify and confirm (Motion
Sequence # 003) is granted in part and rejected in part;
and it is further

ADJUDGED THAT Plaintiff Kerry Connolly does recover of
Defendants TUAN, CONNOLLY & CHO, LLP and TUAN & CHO, LLP,
with offices at 225 Broadway, New York, New York, the sum
of $56,317.24, with interest thereon at the legal rate,
from June 19, 2006, and with $_____________ costs and
disbursements amounting, in all, in the sum of
$_____________ and plaintiff shall have execution
therefore; and it is further

ADJUDGED THAT Plaintiff Kerry Connolly does recover of
Defendant HAN-HSIEN TUAN, of the town of Summit, New Jersey,
the sum of $8,222.41, with interest thereon at the legal
rate, from June 19, 2006, and with $_____________ costs and
disbursements amounting, in all, in the sum of
$_____________ and plaintiff shall have execution
therefore; and it is further

ADJUDGED THAT Defendants TUAN, CONNOLLY & CHO, LLP and TUAN
& CHO, LLP make periodic payments, in accordance withe the
settlement agreement between the parties and dated November
1, 2005, to Kerry Connolly, at her residence address in the
amount and on the dates as follows:

July 1, 2006 >>> $3,833.33

July 15, 2006 >>> $3,833.34

August 1, 2006 >>> $3,833.33

August 15, 2006 >>> $3,833.33

September 1, 2006 >>> $3,833.34

September 15, 2006 >>> $3,833.33

October 1, 2006 >>> $3,833.33

October 15, 2006 >>> $3,833.34

and that a failure to make timely payments will be deemed
a contempt of Court and punished as such; and it is further

ORDERED that all remaining issues in this action are
hereby severed and continued; and it is further

ORDERED that Kerry Connolly cause her damaged hard drive to
be sent to Best Buy/The Geek Squad, the data recovery
service-provider identified in Kerry Connolly’s letter of
June 21, 2006; that data recovery be attempted; that Kerry
Connolly return to Defendants their electronic files
recovered from the drive, if any such files are recovered,
along with an affidavit stating that she has returned all
of Defendants’ electronic files that were in her
possession; and that her failure to do so will be deemed a
contempt of court and punished as such.