Buechel v. Bain
Issue Discussed: Res Judicata / Collateral Estoppel
Submitted by Aluyah I. Imoisili, Jamie E. Sutton*
Date Promulgated: December 20, 2001
Buechel v. Bain, 766 N.E.2d 914 (N.Y. 2001)
Court: Court of Appeals of New York
Issues Decided: Whether parties may be precluded from relitigating the validity of fee arrangements determined to be illegal in an earlier action when the parties are in privity with the person against whom the issue was decided.
The inventors of a prosthetic shoulder device sued their patent attorneys, with whom they had a fee arrangement that entitled their law firm to a portion of profits from the trust, for breach of fiduciary duty and malpractice. Prior to the inventors’ suit, a former partner of the patent law firm filed a separate lawsuit against the investors (as trustees) and the patent lawyers (nominally as beneficiaries) to recover allegedly improper distributions to the trust beneficiaries. At issue in the partner’s action was whether the original fee arrangement was valid and enforceable. The trial court ruled that it was unenforceable and ordered that the trust agreements be rescinded. The patent lawyers, in the inventors’ action, then sought their reinstatement as beneficiaries in the trust. The trial court applied the rulings from the partner’s action and directed the patent lawyers to return all monies distributed pursuant to the invalidated trust.
The Court of Appeals affirmed the trial court and the Appellate Division. The Court of Appeals held the attorneys had a full and fair opportunity to litigate the validity of their fee arrangement with the inventors in the partner’s action. The Court of Appeals also held that because the attorneys knew that the validity of the trust was being vigorously contested and the potential serious adverse consequences of the partner’s litigation, it was appropriate to deem them to be the party against whom the issue was ultimately decided.
Collateral estoppel may also apply preclude a party from relitigating an issue when that party is in privity with those against whom an adverse determination was made.
* Aluyah I. Imoisili is a Partner and Jamie E. Sutton is an Associate at Greenberg Gross LLP, where they specialize in commercial litigation and arbitration.