Globalforce International, Inc. v. LLC (2010)

MEMORANDUM OF DECISION

The plaintiff has filed a ten-count civil complaint against seven defendants.   The complaint alleges a breach of a certain written agreement, a breach of an implied agreement, a claim of unjust enrichment, a breach of the implied covenant of good faith and fair dealing, and violations of the Connecticut Unfair Trade Practices Act, General Statutes Section 42-110(b) (CUTPA).   Named as defendants are Castellano McNamee & Lucci, LLC;  Joseph Castellano CPA, LLC;  Joseph Castellano;  Joseph Criscuolo;  McNamee & Castellano;  Anthony Lucci;  and Castellano, Lucci & Company, LLC. All of the defendants are accountants or accounting firms.

This court heard this matter in a bench trial on April 29 and 30, 2010.   The only witnesses presented by the plaintiff were Max Krotman, Chief Executive Officer of the plaintiff, and Russell Frank, New England manager of the plaintiff.   The defendants offered no witnesses.

Before the start of evidence the defendant Castellano, McNamee and Lucci, LLC filed a Notice of Bankruptcy Filing from the Clerk of the U.S. Bankruptcy Court stating that the defendant Joseph Criscuolo had filed a Chapter 7 petition in Bankruptcy on April 28, 2010.   The plaintiff then filed a withdrawal of action with respect to Mr. Criscuolo.

Attorney Anthony F. Lucci had filed a pro se appearance for himself and an appearance for the defendant Castellano Lucci & Company, LLC;  and also had filed answers to the complaint.   Mr. Lucci did not appear for the trial, and both of the defendants who he had appeared for were defaulted for failure to appear for trial pursuant to Practice Book Section 17-19.

The court finds the following facts and reaches the following conclusions.   The plaintiff Globalforce International, Inc., is a New York corporation that works with accounting firms to facilitate mergers, sales, acquisitions and affiliations between buyers and sellers of accounting firms and practices.   The plaintiff has been in business for forty years.

An accounting firm (buyer) that is interested in acquiring, merging or affiliating with another accounting firm signs a retainer agreement with the plaintiff and pays a $2,000.00 retainer deposit.   The plaintiff then searches for a firm (seller) that is interested in selling, merging or affiliating with another accounting firm.   The plaintiff has developed a list of firms that would be interested in being acquired or merged with another firm by the use of advertising, direct mail, telemarketing, public speaking, and the writing of trade journal articles by officers of the plaintiff.

If the plaintiff locates a worthwhile firm that is interested in being bought out then the plaintiff prepares a one-page prospectus on that firm and sends it to the client list without identifying the seller.   If the client is interested in meeting with the prospective seller then the plaintiff identifies the two parties and arranges a meeting.   If, as a result of the meeting, the buyer and seller are interested in proceeding further the plaintiff then will assist the parties in reaching an agreement.   When the two parties sign an agreement or affiliate in any way then the plaintiff's fee is due and payable.   The fee which is provided for in the retainer agreement is 10% of the audited gross billings of the seller for the prior year, and is paid to the plaintiff by the buyer.   The retainer agreement between the plaintiff and the buyer provides that the plaintiff does not guarantee the records of the seller, and that it is the responsibility of the buyer “to audit and verify all financial records prior to acquisition, merger or affiliation.”   The plaintiff does not enter into any contract with the seller.

On February 3, 1998 Joseph Castellano, the president of Castellano, Arenholz, and Bryan, P.C. (buyer), an accounting firm located in Wallingford, Connecticut, signed a typical retainer agreement (exhibit 1) with the plaintiff.   Exhibit 1 was signed by Castellano as president of the firm.   The accounting firm represented by Castellano was interested in acquiring or merging with another accounting firm.   The firm paid the retainer fee of $2,000.00, and agreed to pay 10% of the audited gross billings of the seller for the prior year, less the $2,000.00 paid, when the merger, acquisition or affiliation became effective.   The retainer agreement contained the other provisions as set forth above.   The buyer firm was assigned a number, filled out a questionnaire about the firm, and Mr. Castellano signed a non-disclosure agreement.   The questionnaire contained the address and phone number of the buyer firm, the name of the principal contact person, the type of work that the firm did, and other relevant information.   The contact person for the buyer firm was Joseph Criscuolo.

After exhibit 1 was signed the plaintiff prepared a prospectus about the buyer firm and commenced searching for firms that would be appropriate for possible purchase, merger or affiliation with the buyer firm, and sending description of firms deemed suitable.   In September 2006, Criscuolo called Frank about meeting with a firm whose prospectus Frank had sent to Castellano, Arenholz, and Bryan.   In the discussion with Criscuolo about the firm that he was interested in, Frank asked Criscuolo about the Castellano, Arenholz, and Bryan firm, so as to update their records.   Criscuolo told Frank that, approximately a month before, two of the partners had left the firm, that Criscuolo was now a member of the firm and was the contact person for the firm, that Anthony Lucci had merged in as a partner, that the address and phone number remained the same, that the firm name had changed from Castellano, Arenholz and Bryan to Castellano and Lucci.   Frank updated the plaintiff's records and assigned the same identification number to the new firm that had been given to Castellano Arenholz & Bryan in 1998.   There was no merger or affiliation on that occasion.

On December 6, 2007 the plaintiff received an e-mail from Sean McNamee, an accountant with a practice located in Wallingford, Connecticut.   McNamee had had contact with the plaintiff a number of years before about selling his practice, had not sold it, but had now decided that he wished to sell.   The e-mail gave extensive details about the practice, the terms of a prospective sale, and that the sale must take place before January 1. McNamee stated that if the plaintiff had anyone interested in acquiring his practice that the plaintiff should contact him.   The plaintiff obtained other information from McNamee, assigned an identification number to McNamee, and prepared a prospectus about the McNamee practice which was sent out to a substantial number of the plaintiff's clients, including the firm which Joseph Criscuolo was associated with, on December 10, 2007.

1 1/2 hours after the McNamee prospectus was sent to Criscuolo he responded, saying that “we would like to meet with 6282,” which was the identification number assigned to McNamee.   The e-mail was sent by “Joseph A. Criscuolo, Accountant, Joseph A. Castellano, CPA, LLC.” It was apparent that the firm of Joseph A. Castellano, CPA, LLC was proceeding in accordance with the original retainer agreement Castellano had signed in 1998, although now proceeding as Joseph A. Castellano, CPA, LLC.

A meeting was arranged by the plaintiff for McNamee, Criscuolo and Castellano to meet on December 13, 2007 at McNamee's office.   The meeting went well and thereafter there were various drafts of an agreement between McNamee and Joseph A. Castellano, CPA, LLC that were circulated among the plaintiff, McNamee and Criscuolo, acting on behalf of Joseph A. Castellano, CPA, LLC. The records of the McNamee firm indicated that the audited gross billings for the prior year had been $550,000.00.   The 10% fee that the plaintiff was to receive when an affiliation was created between McNamee and Joseph A. Castellano, CPA, LLC was referred to in the various drafts as being payable by Joseph A. Castellano, CPA, LLC. As the negotiations dragged on the plaintiff and Joseph A. Castellano, CPA, LLC agreed that the fee could be paid $27,500.00 on December 31, 2007 and $27,500.00 on June 1, 2008.

The parties to the affiliation of the two practices were attempting to close on Monday, December 31, 2007.   On that day at 12:17 p.m. the plaintiff e-mailed to McNamee and Criscuolo a draft of an agreement which it believed was what the parties had agreed to (exhibit 20).   This draft had a “signing copy” that was to be signed by McNamee & Co, LLC and Joseph A. Castellano, CPA, LLC. At the same time the plaintiff e-mailed an invoice for $55,000.00, payable $27,500.00 on December 31, 2007 and $27,500.00 on June 1, 2008, to Joseph A. Criscuolo, Joseph A. Castellano, CPA, and Joseph A. Castellano, CPA, LLC. 19 minutes after the invoice was sent, Criscuolo, accountant for Joseph A. Castellano, CPA, LLC sent an e-mail to Krotman which stated “Max-one quick question.   I thought the initial payment made to Globalforce, which was many years ago was given as a credit against the service?”   Mr. Krotman immediately responded that the $2,000.00 deposit could be credited against the June 1 payment or they could keep the $2,000.00 “pending” so that they could stay on the list.   At 2:14 p.m. Criscuolo responded that “I will talk to the boys” and that they were “leaving to meet Sean now,” and that the check would be sent that night or it might be on Wednesday morning in view of the holiday.   It was apparent that Criscuolo and Castellano, CPA, LLC were proceeding with an oral contract under the terms of the original contract, exhibit 1.

Later on December 31, 2007, at 4:36 p.m., the plaintiff received an e-mail from McNamee which included an unsigned two-page draft of an agreement entitled “Acquisition of certain assets of the accounting and tax practice of W.F. McNamee & Company (WFM) by Castellano & Criscuolo (C & C).”  Attached to the draft was a letter signed by McNamee, Criscuolo and Castellano personally agreeing to the attached agreement as reflecting the terms of a purchase and sale of the client list of McNamee & Company, LLC to Criscuolo & Castellano, which was to be effectuated commencing January 1, 2008 (exhibit 21).   This draft agreement was substantially different than the “signing copy” sent earlier that day by the plaintiff.   It included as item number 13 that “C & C agrees that payment to the Broker ․ is the responsibility of C & C.” The letter also stated that McNamee would send his clients a letter explaining “my association with your firm” in order to provide for the prompt transition of McNamee's clients to Castellano and Criscuolo's accounting service.

Despite the assurances on December 31, 2007 that a check would be sent that night or on Wednesday, no check was sent by Joseph A. Castellano, CPA, LLC.

On January 15, 2008, Criscuolo e-mailed the plaintiff seeking a copy of the contract between “Globalforce and Joe and I.” The e-mail was signed by Criscuolo, accountant, Castellano, Lucci & Co, LLC. The plaintiff sent a copy of exhibit 1. Thereafter, Criscuolo emailed the plaintiff claiming it was difficult to work out the details of the contract with McNamee, but that they were progressing.   McNamee had lost his right to E-file his clients' tax returns, and Castellano, Lucci & Co., LLC, was allowing McNamee to use their EFIN so he could e-mail his client's tax returns.   McNamee had advised the plaintiff that Castellano was supervising the work being done at McNamee's office.

On March 11, 2008, the plaintiff sent a letter to Joseph A. Castellano, CPA, Joseph A. Criscuolo, and Joseph A. Castellano, CPA, LLC. The letter summarized the course of the dealings since the plaintiff had introduced them to McNamee, the efforts on the part of the plaintiff to assist the Castellano operation and McNamee in working out a formal merger agreement, that no one had questioned the fee the plaintiff was charging, and that clearly Castellano had affiliated with McNamee.   The letter also pointed out that the plaintiff had agreed with Criscuolo and Castellano that the bill could be paid in two payments, on December 31, 2007 and June 1, 2008, but that no payment had been made.   The plaintiff did not receive any indication from Criscuolo or Castellano or any of the Castellano entities that there were any disagreements with the contents of the letter of March 11, 2008 (exhibit 31).   On March 18, 2008 the plaintiff received from Criscuolo an unsigned copy of a further revised asset purchase agreement between McNamee and Criscuolo & Castellano, LLC, and an e-mail seeking the plaintiff's thoughts about the contract.

Thereafter there was no further contact between the plaintiff and any of the defendants until the plaintiff sent Criscuolo an email on June 11, 2008, inquiring about the fee.   Nine minutes later the plaintiff received an e-mail form Criscuolo on behalf of Castellano, Lucci & Co., LLC stating “I thought Joe had done that already - let me double check with him this afternoon.”   No payment was received.

On June 13, 2008 the plaintiff received copies of e-mails earlier in June between Criscuolo and Attorney Cheryl Juniewic, LLC, who represented Joseph A. Castellano, LLC, and a copy of a letter from Ms. Juniewic to attorney James Landler, who represented McNamee, about a proposed asset purchase agreement between McNamee and Joseph Castellano, LLC. The proposed agreement was not included, but one of the comments made by Ms. Juniewic was that “my clients currently hold their businesses under the name of Joseph Castellano, LLC.”

On July 7, 2008 the plaintiff received a check for $3,000.00 payable to Globalforce International, Inc., from Joseph A. Castellano, CPA, LLC. Criscuolo referred to the check as “a small payment to be applied to our account.”   Although the $3,000.00 check had been drawn on the account of Joseph A. Castellano, CPA, LLC, Criscuolo's e-mail was signed by him as accountant for Castellano, Lucci & Co., LLC. On December 17, 2008 the plaintiff received an email from Criscuolo as accountant for Castellano, Lucci & Co., LLC advising that Joe and he had just finished meeting with their partner in West Haven “to go over the buyout details and he was on board.”   The partner had previously been identified as Anthony Lucci.   The e-mail stated that the only thing left to do was for the lawyers to finish the paperwork.   The plaintiff had no further contact with Criscuolo or Castellano until this litigation commenced.

The evidence has established that the firm of Joseph A. Castellano, CPA, LLC by its conduct entered into an oral contract with the plaintiff to perform the obligations of the firm of Castellano, Arenholz & Bryan as set forth in exhibit 1. The plaintiff, although not required to do so by exhibit 1, spent over 200 hours in efforts to bring the Castellano firm and McNamee together.   The plaintiff performed all of its obligations pursuant to exhibit 1 and the defendant Joseph A. Castellano, CPA, LLC received all of the benefits of the contract.   The evidence is clear that early in 2008 there was an affiliation of the McNamee accounting firm and Joseph A. Castellano, CPA, LLC.

In January 2008, the firm of Joseph A. Castellano, CPA, LLC changed its name to Castellano, Lucci & Co, LLC, and that firm continued to proceed under the terms of exhibit 1, and was located at the same address and with the same telephone number and fax number as Joseph A. Castellano, CPA, LLC. The firm also used the name of McNamee & Castellano in answering the telephone in 2008 and continues to use the same name in April of 2010.   In answers to a discovery request (exhibit 37) the defendants claimed that “prior to January 1, 2009 the firm of Castellano, McNamee & Lucci, LLC, (formerly known as Joseph A. Castellano, CPA, LLC) and Anthony Lucci CPA were members of the business known as Castellano, Lucci & Co, LLC. On January 1, 2009 Anthony Lucci, CPA became an employee of Castellano, McNamee & Lucci LLC and then was released from employment in December of 2009.”   Based on this answer to an interrogatory the defendants claim that the chronological sequence of firms was Joseph A. Castellano, CPA, LLC, then Castellano, Lucci & Co., LLC, and then Castellano, McNamee & Lucci, LLC, and since 2008 and up to the trial in this case they have been dealing with their telephone customers and the public as McNamee & Castellano.

The defendants claim that the plaintiff cannot recover on a theory of an oral contract because it violates the Statute of Frauds of both New York and Connecticut in that the contract did not come to completion within one year of its making.   There is no merit to this claim.   The cases in Connecticut and New York do not hold that an oral contract which is not in fact performed in one year is unenforceable.  “We therefore hold that an oral contract that does not say, in express terms, that performance is to have a specific duration beyond one year is, as a matter of law, the functional equivalent of a contract of indefinite duration for the purposes of the statute of frauds.   Like a contract of indefinite duration, such a contract is enforceable because it is outside the proscriptive force of the statute regardless of how long completion of performance will actually take.”  C.R. Klewin, Inc. v. Flagship Properties, Inc., 220 Conn. 569, 583-84 (1991).   See also Micena v. Katz, 68 A.D.3d 826-27 (2d Dept.2009).   The oral contract in this case did not provide that performance was to have a specific duration beyond one year, and is enforceable.   In addition, the full performance of the oral contract by the parties takes the contract out of the statute of frauds.

The evidence about the frequent change of names of what is the same basic accounting operation shows that with each change of name there was a merger or consolidation of the two businesses and that the successor was merely a continuation of its predecessor.   The business called Joseph A. Castellano CPA, LLC, clearly had entered into an oral contract with the plaintiff pursuant to the terms of the original written contract signed by Castellano in 1998.   After its affiliation with McNamee in 2008, Castellano and his associates hired McNamee and put his name in the title, took over McNamee's office and clients, and used their own IRS EFIN number to e-file 1200-1400 tax returns for McNamee's clients.   The name change in January 2008 to Castellano, Lucci & Co., LLC reflected the employment of Lucci but was a mere continuation of the same business, followed by a similar name change to Castellano, McNamee & Lucci, LLC in 2009.   The court finds that Joseph A. Castellano, CPA, LLC;  Castellano, McNamee and Lucci, LLC;  McNamee & Castellano;  and Castellano, Lucci and Co., LLC, are liable to the plaintiff for the obligation on their oral contract with the plaintiff.   Under their various corporate structures they have all participated and continue to participate in the affiliation with McNamee, an affiliation initially brought about through the efforts of the plaintiff.   Castellano, Lucci & Co., LLC is also liable based on the default for failure to appear for trial.

The defendants claim that the evidence of damages as claimed by the plaintiff is speculative.   The fee was to be 10% of the selling broker's billings for the prior year.   This was provided in exhibit 1 and therefore is part of the oral agreement.   Joseph A. Castellano, CPA, LLC negotiated with the plaintiff to make the fee payable in two payments and the plaintiff agreed.   The fee of $55,000.00 has not been disputed by any of the defendants prior to this litigation and the amount of the fee is not speculative.

The defendants by a special defense have requested a set-off of any funds received by the plaintiff from the assets of Criscuolo in his federal bankruptcy proceedings, and that any judgment obtained by the plaintiff in this case be stayed pending a discharge in bankruptcy and a determination as to what funds, if any, the plaintiff will receive.   There is no evidence that the plaintiff is likely to receive any funds from the Criscuolo bankruptcy.   The defendants have not cited any authority for this unusual request.   The plaintiff has obtained a judgment in the same amount against several defendants.   However, the plaintiff can collect only once.   If the plaintiff receives any funds from the Criscuolo bankruptcy which result in the plaintiff obtaining more than the amount of the judgment entered, this court will grant appropriate relief to any defendant on request.   The request for a set-off is denied.

The defendants have failed to prove any of their remaining special defenses.

The plaintiff has proven that the amount of the oral contract was $55,000.00, payable in two installments on December 31, 2007 and June 1, 2008.   The plaintiff has been paid a total of $5,000.00, $3,000.00 in early July 2008, and the court will credit the $2,000.00 deposit to the December 31, 2007 payment.   The court grants 10% interest pursuant to Section 37-3a of the General Statutes from December 31, 2007 to October 1, 2010.   Interest is computed as follows:  The December 31, 2007 payment of $25,500 x 10% x 33 months from July 1, 2008 through October 1, 2010-$7,012.50. The June 1, 2008 payment of $27,500.00 x 10% x 1 month (June 2008)-$229.17 and $24,500.00 x 10% x 27 months from July 1, 2008 through October 1, 2010-$5,512.32. The total amount of interest as of October 1, 2010 is $12,753.99.   The interest on the principal of $50,000.00 is $14.24 per day.

At the commencement of the trial defaults for failure to appear for trial were entered against Anthony Lucci and Castellano, Lucci & Co., LLC. For the foregoing reasons a judgment may enter against each of the defendants Joseph A. Castellano, CPA, LLC;  McNamee & Castellano;  Castellano, McNamee & Lucci, LLC;  Castellano, Lucci and Co., LLC, and Anthony Lucci in the sum of $62,753.99.

William L. Hadden, J.T.R.

Hadden, William L., J.T.R.