The Court of Appeals Writes on "Continuous Representation"

The statute of limitations is an extraordinarily powerful concept.  After a specific period of time, it's just too late to sue, even though the defendant was totally and wholly wrong.  It's just too late!  Its a completely arbitrary period of time, too.

So, courts have ameliorated the hardship from time to time.  One way of mitigating the harsh rule is that of "continuous representation" in legal malpractice.  It basically says that the S/L does not start to run until the attorney has completed the work for the client.  Of course there are many intricacies, too. 

This week, Matter of Lawrence  2014 NY Slip Op 07291   was decided on October 28, 2014
by the New York Court of Appeals, with a decision by Read, J.  It is very, very important for the contingent fee world, and has much to say about continuous representation.

"There is a difference between an attorney's alleged malfeasance in the provision of professional services on his client's behalf, and a dispute between an attorney and his client over a financial transaction, such as legal fees or, in this case, a gift. Simply put, when an attorney engages in a financial transaction with a client, by charging a fee or, as in this case, accepting a gift, the attorney is not representing the client in that transaction at all, much less representing [*11]the client continuously with respect to "the particular problems (conditions) that gave rise to plaintiff's malpractice claims" against the attorney (id. at 11). The attorney and client are engaging in a transaction that is separate and distinct from the attorney's rendition of professional services on the client's behalf (see e.g. Woyciesjes, 151 AD2d at 1014-1015 [rejecting applicability of the continuous representation doctrine to the plaintiff's claim that his former attorney improperly charged him a fee of 50% rather than one-third]).

We have never endorsed continuous representation tolling for disputes between professionals and their clients over fees and the like, as opposed to claims of deficient performance where the professional continues to render services to the client with respect to the objected-to matter or transaction. Nor do the rationales underlying continuous representation tolling support its extension beyond current limits.

Two rationales inform the rule. First, a lay person "realistically cannot be expected to question and assess the techniques employed or the manner in which [professional] services are rendered"; specifically, a client cannot "be expected, in the normal course, to oversee or supervise the attorney's handling of the matter" (Greene v Greene, 56 NY2d 86, 94 [1982]). Thus, the client should not be burdened with the obligation to identify the professional's errors in the midst of the representation as "[t]he client is hardly in a position to know the intricacies of the practice or whether the necessary steps in the action have been taken" (Siegel v Kranis, 29 AD2d 477, 480 [2d Dept 1968]). Relatedly, a client cannot be "expected to jeopardize his pending case or his relationship with the attorney handling that case during the period that the attorney continues to represent the person" as to the matter giving rise to the malpractice claim (Glamm, 57 NY2d at 94). Second, a client who becomes aware of an error should not be required to sue immediately since that would only "interrupt corrective efforts" (Borgia v City of New York, 12 NY2d 151, 156 [1962] [establishing the continuous treatment rule for medical malpractice]).

When a client pays a lawyer or gives the lawyer a gift, the lawyer is not — in that transaction — "perform[ing] legal services on the [client's] behalf" (Greene, 56 NY2d at 95). As a result, requiring the client to dispute the payment or seek return of the gift within the ordinary limitations period does not force a lay person to undertake actions that he is ill-equipped to carry out; i.e., to "question and assess the techniques employed" by the professional, or evaluate "the manner in which the services are rendered" or "oversee or supervise the attorney's handling of the matter" (id. at 94). Notably, clients are obligated to review attorney's invoices on a timely basis, rather than wait until the representation ends before raising objections (see Whiteman, Osterman & Hanna, LLP v Oppitz, 105 AD3d 1162, 1163 [2013] [an attorney or law firm may recover on a cause of action for an account stated "with proof that a bill, even if unitemized, was issued to a client and held by the client without objection for an unreasonable period of time(, and) need not establish the reasonableness of the fee since the client's act of holding the statement without [*12]objection will be construed as acquiescence as to its correctness"] [internal quotation marks omitted])."

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The Successor Counsel Problem in Legal Malpractice

Client hires attorney and, let's say, the relationship sours.  Client moves on to attorney 2 and there is a bad outcome to the litigation.  Who is responsible (if anyone)?  Is it attorney 1 or attorney 2 or both?

Tooma v Grossbarth   2014 NY Slip Op 07347  Decided on October 29, 2014  Appellate Division, Second Department is the exploration of this question, from the opposite persepctive.  Can attorney 1 successfully dismiss the case on the theory that Attorney 2 should/could have fixed the problem, but didn't.  In this case attorney 1 fails, but others have succeeded.

"The defendants are an attorney and his law firm who represented the plaintiff in an underlying medical malpractice action that was commenced in December 2006. In the underlying action, the plaintiff alleged that he was injured as a result of medical malpractice arising from certain spinal surgery that he underwent on May 21, 2004, and the continuous "care and treatment" that he received until "at least June 18, 2004." In January 2012, while the underlying action was pending, it was brought to the attention of the Supreme Court in that action that the defendant Joel A. Grossbarth, the only practicing attorney associated with the defendant law firm Tognino & Grossbarth, LLP, was suspended from the practice of law. The Supreme Court stayed the underlying action until March 30, 2012, so that the plaintiff could retain new counsel. Thereafter, upon the motion of the defendants in the underlying action, the Supreme Court, in an order dated August 20, 2012, directed the dismissal of the complaint in the underlying action, based on the plaintiff's failure to proceed to trial."

"The plaintiff contends that the defendants failed to timely join proper parties in the underlying action. Accordingly, the fact that the Supreme Court dismissed the complaint in the underlying action, which was asserted solely against parties that were allegedly not culpable to the plaintiff for improper medical treatment, and was based solely on the failure to proceed to trial, does not dispose of the plaintiff's claim sounding in legal malpractice, since the order directing the dismissal of the complaint in the underlying action did not address the merits of the underlying action or the causes of action that the plaintiff may have had against the persons who were not joined as defendants in that action. Thus, the Supreme Court properly denied that branch of the defendants' motion which was pursuant to CPLR 3211(a)(1) to dismiss the complaint in this action."

"The defendants argue that, had the plaintiff retained successor counsel in the underlying action, that counsel could have remedied any alleged negligence that the defendants might have committed in their capacity as initial counsel, thus breaking any causal link between the negligence of initial counsel and the plaintiff's damages. We reject the defendants' contention. Unlike the instant action, the cases upon which the defendants rely arise from matters where the relief sought by a party was an absolute right, or where control of the outcome of litigation was wholly in the hands of successor counsel (see DiGiacomo v Levine, 76 AD3d 946; Volpe v Canfield, 237 AD2d 282; see also Katz v Herzfeld & Rubin, P.C., 48 AD3d 640, 641; Ramcharan v Pariser, 20 AD3d 556, 557; Perks v Lauto & Garabedian, 306 AD2d 261; Albin v Pearson, 289 AD2d 272; Kozmol v Law Firm of Allen L. Rothenberg, 241 AD2d 484). In order to remedy the negligence allegedly committed by the defendants in their capacity as the plaintiff's initial counsel in the underlying action, any subsequent counsel in that action would have needed far more than a [*3]reasonably sufficient period of time in which to litigate the issue of the nonjoinder of proper parties (see Grant v LaTrace, 119 AD3d 646). Rather, to remedy that alleged negligence, a substituted counsel, or the plaintiff pro se, would have had to successfully litigate a motion to join allegedly culpable parties as additional defendants in the underlying action approximately five years after the statute of limitations on the medical malpractice cause of action had expired (see CPLR 214-a, 203[b]). The record before us provides no evidence to support the defendants' contention that such a motion would have been successful (see Stevens v Winthrop S. Nassau Univ. Health Sys., Inc., 89 AD3d 835, 836; Matter of Murphy v Kirkland, 88 AD3d 267; Shapiro v Good Samaritan Regional Hosp. Med. Ctr., 42 AD3d 443, 444)."

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Conversion of Guardian Funds Sets Up a Tangled Web of Legal Malpractice Litigation

Many lawyers are disciplined, and some are disbarred over the conversion of their ward's funds.  Guardianships are necessary for those who cannot manage their own finances, and for the most part are beneficial to the wards.  Sometimes, however, the existence of money just sitting there can be too much of a temptation.  So it was in United States Fire Ins. Co. v Raia  2014 NY Slip Op 07146  Decided on October 22, 2014  Appellate Division, Second Department. 

"The defendant Camille A. Raia was appointed guardian of the property of Andrea S., an incapacitated person (hereinafter the IP). Raia obtained a guardianship bond through the plaintiff, United States Fire Insurance Company (hereinafter US Fire), as surety. Subsequently, Raia's law partner, the defendant Steven T. Rondos, began to handle the guardianship. During the course of the guardianship, Cavalcante & Company (hereinafter C & C), an accounting firm, was retained to prepare annual tax returns on behalf of the IP. Ultimately, Raia was removed as the guardian of the IP's property as a result of a criminal investigation into the wrongful conversion of funds by Rondos. The court accepted an account stated as Raia's final account for the period she acted as guardian of the IP's property, and surcharged her in a certain amount. US Fire and the IP, through a successor guardian, entered into a stipulation by which the IP released US Fire from further liability under the bond and assigned all rights and causes of action to it in exchange for a payment in the amount of $1,100,000.

US Fire, on its own behalf and as the IP's subrogee/assignee, commenced this action against, among others, Raia, Raia & Rondos, P.C., Rondos, and C & C. US Fire alleged, with respect to C & C, that it committed professional malpractice by failing to detect unlawful withdrawals made from the IP's investment account and to report the accounting regularities. In its answer, C & C asserted cross claims against Raia, Rondos, and Raia & Rondos, P.C., seeking contribution and common-law indemnification. US Fire settled with Raia, Rondos, and Raia & Rondos, P.C., and thereupon executed a release in favor of Raia, and a separate release in favor of Rondos and Raia & Rondos, P.C.

Raia moved, inter alia, for summary judgment dismissing C & C's cross claims insofar as asserted against her and pursuant to 22 NYCRR 130-1.1 for an award of attorney's fees. Rondos and Raia & Rondos, P.C., separately moved, inter alia, for summary judgment dismissing C & C's cross claims insofar as asserted against them. C & C opposed the motions and cross-moved for summary judgment on its cross claims insofar as asserted against Raia, Rondos, and Raia & Rondos, P.C. The Supreme Court, in effect, granted those branches of the motions and denied the cross motion.

Raia, Rondos and Raia & Rondos, P.C., demonstrated their prima facie entitlement to judgment as a matter of law on C & C's cross claim for contribution insofar as asserted against them. "A release given in good faith by the injured person to one tortfeasor as provided in [General Obligations Law § 15-108(a)] relieves him [or her] from liability to any other person for contribution as provided in article fourteen of the civil practice law and rules" (General Obligations Law § 15-108[b]). Here, US Fire, upon settling with Raia, Rondos and Raia & Rondos, P.C., executed a release in favor of Raia, and a separate release in favor of Rondos, and Raia & Rondos, P.C., and there is no evidence in the record indicating that the releases were not given in good faith. Thus, Raia, Rondos, and Raia & Rondos, P.C., established, prima facie, that they were released from liability to C & C for contribution (see Balkheimer v Spanton, 103 AD3d 603; Ziviello v Boyle, 90 AD3d 916, 917; Boeke v Our Lady of Pompei School, 73 AD3d 825, 826-827; Kagan v Jacobs, 260 AD2d 442, 442-443; Brown v Singh, 222 AD2d 392). In opposition, C & C failed to raise a triable issue of fact.

"

 

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What is a Plaintiff to Do?

Deep v Boies  2014 NY Slip Op 07215  Decided on October 23, 2014  Appellate Division, Third Department  is the story of a plaintiff who lost an early start-up web site/application called "Aimster."  His claim is that it was taken from him by his attorney, the very powerful David Boies. 

When Plaintiff sued Boies and the firm, litigation ensued over missing documents, many missing documents.  How is a plaintiff to prove that the law firm was representing him when they no longer have any of the necessary documents?

"As detailed in our prior decision in this matter (53 AD3d 948 [2008]), plaintiff commenced this action in October 2005 alleging that defendant David Boies, defendant Boies, Schiller & Flexner, LLP (hereinafter BSF) and defendant Straus & Boies LLP engaged in certain acts of legal malpractice. Pertinent here, plaintiff alleged that Boies, BSF and Straus & Boies (hereinafter collectively referred to as defendants) misappropriated plaintiff's file sharing software, known as Aimster, while serving as his counsel with regard to myriad transactions involving the different corporate entities established to develop and market the software. In our prior decision, we affirmed Supreme Court's rulings that the cause of action for malpractice based on the misappropriation was asserted outside of the applicable three-year statute of limitations (see CPLR 214 [6]), but questions of fact existed with regard to whether the time to commence the action was tolled by the continuous representation doctrine (53 AD3d at 952). We observed that "after appropriate discovery, the trial court [could] elect to order an immediate trial on this issue as it could expeditiously dispose of the entire action" (id. at 952). With the [*2]parties' consent, Supreme Court oversaw what became protracted discovery before scheduling a trial pursuant to CPLR 3212 (c). Following the trial, the court dismissed plaintiff's complaint and, thereafter, denied plaintiff's motions for a new trial and/or to renew or reargue (see CPLR 2221, 4404). This Court denied plaintiff's motion to vacate our July 2008 decision and for expedited consideration and sanctions. Plaintiff now appeals from the judgment dismissing his complaint, as well as from the order denying plaintiff's posttrial motions.[FN1]

Although we previously denied defendants' request for summary judgment because the scope of the legal relationship between the parties was unclear, there is no dispute that BSF represented plaintiff in the copyright litigation and that their legal relationship in that litigation had terminated by November 4, 2002. According to plaintiff, defendants misappropriated software, at the latest, on June 25, 2002 (53 AD3d at 950). Since this action was not commenced until October 28, 2005, outside of the three-year statute of limitations (see CPLR 214 [6]), plaintiff's burden of proof at trial was to establish that the copyright litigation was part of a "continuing, interconnected representation" (53 AD3d at 952) by defendants. If so, the statute would have been tolled through November 4, 2002 and the action would have been commenced on a timely basis.

"The continuous representation doctrine tolls the statute of limitations . . . where there is a mutual understanding of the need for further representation on the specific subject matter underlying the malpractice claim" (McCoy v Feinman, 99 NY2d 295, 306 [2002]). It requires more than a continuing, general, professional relationship; it "tolls the [s]tatute of [l]imitations only where the continuous representation pertains specifically to the matter in which the attorney committed the alleged malpractice" (Shumsky v Eisenstein, 96 NY2d 164, 168 [2001]). Plaintiff concedes that there was no retainer agreement or letter of engagement detailing the scope of the relationship between plaintiff and defendants. Rather, his claim of continuous representation stems from unsigned correspondence dated November 8, 2000, wherein an entity known as Datamine LLC, purportedly controlled by Boies and/or members of his family, outlined the advisory services it would provide to Buddy USA Inc., an entity controlled by plaintiff and created to market and develop the Aimster service, and correspondence dated November 15, 2000 from Boies addressed to plaintiff as chief executive officer of Buddy USA, wherein Boies stated that his son had agreed to serve on Buddy USA's board of directors to represent Datamine's 15% equity interest in the company. According to plaintiff, the November 15, 2000 letter confirmed an oral agreement reached between Boies, plaintiff and defendant William Duker during a meeting that they had in October 2000."

'We recognize that, although plaintiff claims that certain documents should exist, defendants produced more than 5,000 pages of documents during disclosure and have consistently maintained and affirmed that they do not possess any more documents responsive to plaintiff's demands. In this regard, plaintiff cannot show a clear abuse of discretion because Supreme Court could not compel defendants to produce documents that do not exist (see Mary Imogene Bassett Hosp. v Cannon Design, Inc., 97 AD3d 1030, 1032 [2012]). On this record, we find that Supreme Court properly exercised its discretion by accepting defendants' affirmation that they had produced all records related to their representation of plaintiff (see Matter of Scaccia, 66 AD3d 1247, 1249-1250 [2009]).

We also perceive no error by Supreme Court with regard to defendants' "lost" emails. When plaintiff first raised the issue, defendants affirmed that, even if the files could be restored, it would be at great expense. In March 2011, Supreme Court directed defendants to cooperate with an expert retained by plaintiff to investigate whether emails generated during 2000 and 2001 could be restored and produced. The court emphasized, without objection from plaintiff, that such investigation was to be done at plaintiff's expense. After plaintiff failed to conduct the permitted investigation, Supreme Court issued a letter order in June 2011 confirming that the parties would endeavor to find a computer forensics expert to examine the computer, again at plaintiff's expense [FN7]. Plaintiff chose not to avail himself of this opportunity, and we cannot conclude that Supreme Court abused its discretion by conducting the hearing without the "lost" emails.

We also reject plaintiff's claim that Supreme Court erred by conducting the hearing pursuant to CPLR 3212 (c) and that it should have conducted a trial on the merits of his misappropriation claim. Supreme Court could not decide the merits of plaintiff's claim until it resolved the statute of limitations issue (53 AD3d at 950). The record confirms that plaintiff repeatedly acknowledged this, and urged the court to conduct the immediate trial."

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The Judgment Rule in Complex Litigation

In a case with complex legal issues, are attorneys given an extended range in which to make "decisions" rather than "departures"?  It seems so.  What might be a "mistake" in another setting is a "judgment call" here.

M & R Ginsburg, LLC v Segel, Goldman, Mazzotta & Siegel, P.C.  2014 NY Slip Op 07227  Decided on October 23, 2014  Appellate Division, Third Department holds that a judgment call by third-party attorneys is not subject to legal malpractice.

"Third-party defendants moved to dismiss the third-party complaint, which was treated by the parties and Supreme Court as a motion for summary judgment (see Gregware v Key Bank of N.Y., 218 AD2d 859, 861 [1995], lv denied 87 NY2d 803 [1995])[FN1]. Supreme Court granted third-party defendants' motion and defendants appeal.

We affirm. Third-party defendants established with regard to the complex legal issue facing plaintiff that the legal course they recommended — after consulting with plaintiff and defendants — was "one among several reasonable courses of action [and did] not constitute malpractice" (Rosner v Paley, 65 NY2d 736, 738 [1985]; see Bixby v Somerville, 62 AD3d 1137, 1139 [2009]). Although defendants speculate that a different strategy might have ultimately led to a more beneficial result for plaintiff, such speculation as to other possible legal avenues is insufficient to implicate malpractice (see Rosner v Paley, 65 NY2d at 738). Defendants' allegations and proof regarding third-party defendants' representation of plaintiff did not raise a triable issue when measured by the applicable standard in a legal malpractice action (see Russo v Feder, Kaszovitz, Isaacson, Weber, Skala & Bass, LLP, 301 AD2d 63, 69 [2002]; Bassim v Halliday, 234 AD2d 628, 630 [1996], appeal dismissed 89 NY2d 1001 [1997]; Bernstein v Oppenheim & Co., 160 AD2d 428, 430 [1990])."

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The Inflexible Statute of Limitations in Legal Malpractice

It's THREE years, and not a day more.  In legal malpractice, no matter whether your claim is based on negligence or breach of contract CPLR 214(6) states that one has 3 years in which to bring the action.

Tsafatinos v Law Off. of Sanford F. Young, P.C.  2014 NY Slip Op 07145  Decided on October 22, 2014  Appellate Division, Second Department is one more example of this harsh, bright-line rule.

"On a motion to dismiss a cause of action pursuant to CPLR 3211(a)(5) as barred by the applicable statute of limitations, a defendant must establish, prima facie, that the time within which to sue has expired (see Bullfrog, LLC v Nolan, 102 AD3d 719, 719). Once that showing has been made, the burden shifts to the plaintiff to raise a question of fact as to whether the statute of limitations has been tolled, an exception to the limitations period is applicable, or the plaintiff actually commenced the action within the applicable limitations period (see id.).

Here, the defendants sustained their initial burden by demonstrating that the cause of action alleging legal malpractice accrued, at the latest, on April 22, 2008, a date more than three years before the commencement of this action (see CPLR 214[6]; Landow v Snow Becker Krauss, P.C., 111 AD3d 795, 796; Bullfrog, LLC v Nolan, 102 AD3d at 719). In opposition, the appellant failed to raise a question of fact (see Bullfrog, LLC v Nolan, 102 AD3d at 719; Daniels v Turco, 84 AD3d 858, 858-859; Piliero v Adler & Stavros, 282 AD2d 511, 511-512). Accordingly, the Supreme Court properly granted that branch of the defendants' motion which was to dismiss, as time-barred, the legal malpractice cause of action insofar as asserted by the appellant.

"

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Hedge Funds, Insurance Companies and Legal Malpractice

Legal malpractice cases come up in all kinds of settings.  It may be the individual personal injury plaintiff whose case was not started on time; it may be the car accident in which the doctor's reports failed to give the necessary descriptions of the injury and the case was dismissed, and sometimes it can be hedge funds complaining about loans gone bad because of faulty legal advice.  Here, in Genesis Merchant Partner v. Gilbride Tusa, 653145/2014 we see some of the big boys at play.

Christine Simmons, in today's New York Law Journal reports that: "Two investment funds have sued 20-attorney Gilbride, Tusa, Last & Spellane for malpractice, claiming the firm failed to perfect the funds' security interest in life insurance policies, leading to more than $84 million in damages.
"This is an open-and-shut case of legal malpractice and gross incompetence by Gilbride Tusa," the funds claim in Genesis Merchant Partner v. Gilbride Tusa, 653145/2014 (See Complaint).
But Gilbride Tusa in a statement called the suit's allegations "false, inaccurate and distorted versions of the events that seek to blame others for an unsuccessful loan of approximately $3 million made by the plaintiffs."


"Gilbride, Tusa, Last & Spellane denies these baseless allegations and anticipates being totally vindicated in court. In addition, we expect to obtain a judgment against the plaintiffs for the substantial unpaid legal fees owed to the Gilbride firm," said Joseph Francoeur and Thomas Leghorn, partners at Wilson Elser Moskowitz Edelman & Dicker who represent the firm.
The plaintiffs are investment funds Genesis Merchant Partners LP and Genesis Merchant Partners II LP, created by hedge fund Sands Brothers Asset Management. They are suing Gilbride Tusa, which has offices in New York and Connecticut, and Connecticut-based partners Jonathan Wells, Kenneth Gammill Jr. and Charles Tusa.


Genesis claims the funds paid Gilbride Tusa about $60,000 in legal fees to draft secured loan documents for about $4.4 million in loans to Progressive Capital Solutions LLC.
Progressive was a buyer of "life settlement" policies, which are life insurance policies that have been sold by their initial owners and are traded on a secondary market."

 

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A New Rule For Legal Malpractice and Appeals

Up to today, the rule in legal malpractice litigation has been that Plaintiff was not required to appeal from a decision in order to sue his attorney.  That all changed today with the Court of Appeals decision in Grace v Law  2014 NY Slip Op 07089  Decided on October 21, 2014  Court of Appeals
Abdus-Salaam, J.  The rule is now that "prior to commencing a legal malpractice action, a party who is likely to succeed on appeal of the underlying action should be required to press an appeal. However, if the client is not likely to succeed, he or she may bring a legal malpractice action without first pursuing an appeal of the underlying action."

From the decision:  "We are presented with an issue of first impression for this Court:

What effect does a client's failure to pursue an appeal in an underlying action have on his or her ability to maintain a legal malpractice lawsuit? We hold that the failure to appeal [*2]bars the legal malpractice action only where the client was likely to have succeeded on appeal in the underlying action.

While this Court has not had occasion to enunciate the appropriate standard for bringing legal malpractice lawsuits in the circumstances presented here, the Appellate Division Departments have examined similar circumstances (see Rupert v Gates & Adams, P.C., 83 AD3d 1393 [4th Dept 2011]; Rodriguez v Fredericks, 213 AD2d 176 [1st Dept 1995]). Those decisions — presented in the settlement context — generally stand for the proposition that an attorney should be given the opportunity to vindicate him or herself on appeal of an underlying action prior to being subjected to a legal malpractice suit.

Defendants contend that a plaintiff forfeits his or her opportunity to commence a legal malpractice action when he or she fails to pursue a nonfrivolous or meritorious appeal that a reasonable lawyer would pursue (see Sands v State of New York, 49 AD3d 444, 444 [1st Dept 2008]; see also MB Indus., LLC v CNA Ins. Co., 74 So 3d 1173 [LA 2011]; Rondeno v Law Office of William J. Vincent, 111 So 3d 515, 524 [LA 4th CCA 2013]). In contrast, plaintiff urges us to adopt a "likely to succeed" standard. Courts applying the "likely to succeed" standard analyze whether a client can commence a legal malpractice action without taking an appeal in the underlying action based upon the likelihood of success on that underlying appeal. In Hewitt v Allen (118 Nev 216 [Nev 2002]), the Supreme Court of Nevada held that the voluntary dismissal of an underlying appeal does not constitute abandonment where the appeal "would be fruitless or without merit" (id. at 216). The United States District Court for the District of Nevada interpreted Hewitt to mean that a defendant would have to show that the pending appeal was "likely" to succeed (U-Haul Co. of Nevada, Inc. v Gregory J. Kramer, Ltd., 2013 WL 4505800, at *2 [D. Nev. 2013]). Florida courts have held that "[w]here a party's loss results from judicial error occasioned by the attorney's curable, nonprejudicial mistake in the conduct of the litigation, and the error would most likely have been corrected on appeal, the cause of action for legal malpractice is abandoned if a final appellate decision is not obtained" (Segall v Segall, 632 So 2d 76, 78 [Fla 2d DCA 1993]; see Technical Packaging, Inc. v Hanchett, 990 So 2d 309, 316 [Fla 2d DCA 2008]; Eastman v Flor-Ohio, Ltd., 744 So 2d 499, 504 [Fla 5th DCA 1999]).

Defendants argue that the "likely to succeed" standard should not be adopted because it requires courts to speculate on the outcome of the underlying appeal. They posit, nevertheless, that even were we to adopt the "likely to succeed" standard, plaintiff could have succeeded on an appeal of the underlying action and, thus, should not be allowed to sue them for legal malpractice.

Here, the Appellate Division adopted the likely to succeed standard employed by [*5]our sister states with a proximate cause element [FN2]. We agree that this is the proper standard, and that prior to commencing a legal malpractice action, a party who is likely to succeed on appeal of the underlying action should be required to press an appeal. However, if the client is not likely to succeed, he or she may bring a legal malpractice action without first pursuing an appeal of the underlying action.

On balance, the likely to succeed standard is the most efficient and fair for all parties. This standard will obviate premature legal malpractice actions by allowing the appellate courts to correct any trial court error and allow attorneys to avoid unnecessary malpractice lawsuits by being given the opportunity to rectify their clients' unfavorable result. Contrary to defendants' assertion that this standard will require courts to speculate on the success of an appeal, courts engage in this type of analysis when deciding legal malpractice actions generally (see Davis v Klein, 88 NY2d 1008, 1009-1010 [1996] ["In order to establish a prima facie case of legal malpractice, a plaintiff must demonstrate that the plaintiff would have succeeded on the merits of the underlying action but for the attorney's negligence"]; see also Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442-443 [2007]; McKenna v Forsyth & Forsyth, 280 AD2d 79, 82 [4th Dept 2001]). We reject the nonfrivolous/meritorious appeal standard proposed by defendants as that would require virtually any client to pursue an appeal prior to suing for legal malpractice."

 

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Is It Partnership Fraud or Individual Fraud in this Legal Malpractice Case?

Attorneys represent individual client for a personal injury case.  The attorneys also represent two companies that are run by the individual.  The PI case settles and the attorneys want to apply the settlement monies against the bills for the company's commercial litigation.  It all goes wrong thereafter. 

Salazar v Sacco & Fillas, LLP  2014 NY Slip Op 00980 [114 AD3d 745]  February 13, 2014
Appellate Division, Second Department  discusses what happens when fraud is brought against various individual attorneys and the firm.

'To state a cause of action sounding in fraud, a plaintiff must allege that "(1) the defendant made a representation or a material omission of fact which was false and which the defendant knew to be false, (2) the misrepresentation was made for the purpose of inducing the plaintiff to rely upon it, (3) there was justifiable reliance on the misrepresentation or material omission, and (4) injury" (Selechnik v Law Off. of Howard R. Birnbach, 82 AD3d 1077, 1078 [2011]; see McDonnell v Bradley, 109 AD3d 592, 592-593 [2013]). In the instant matter, the complaint alleged that Fillas, one of the attorneys representing the plaintiff and the Always companies, made certain false statements, including, inter alia, misrepresenting the amount of past-due attorney's fees owed by the Always companies, and falsely stating, in effect, that he could sue the plaintiff personally for the sums allegedly owed by the Always companies. The complaint further alleged that these statements were known by Fillas to be false at the time they were made, and were intended to deceive, coerce, and induce the plaintiff into entering into the settlement agreement, and that the plaintiff relied on these statements to his detriment. Accordingly, these allegations were sufficient to state a cause of action alleging fraud against Fillas and the law firm (see Partnership Law §§ 24, 25, 26 [e]; Rabos v R&R Bagels & Bakery, Inc., 100 AD3d 849 [2012]).

However, the complaint fails to state a cause of action sounding in fraud against Sacco. As a general matter, Partnership Law § 26 (a) (1) imposes joint and several liability upon all individual partners in a partnership for all obligations chargeable to the partnership under Partnership Law §§ 24 and 25, which are referable to wrongful acts committed by one or more partners of the partnership acting in the ordinary course of partnership business. Partnership Law § 26 (b), however, immunizes from individual liability any partner in a partnership registered as a limited liability partnership who did not commit the underlying wrongful act, except to the extent that Partnership Law § 26 (c) imposes liability on that partner where he or she directly supervised the person who committed the wrongful act and Partnership Law § 26 (d) imposes liability on that partner where he or she had previously agreed to assume individual liability for wrongs committed by another partner. Although, at this stage of the litigation, the plaintiff " 'need only set forth sufficient information to apprise defendants of the alleged wrongs' " (Selechnik v Law Off. of Howard R. Birnbach, 82 AD3d at 1079, quoting DDJ Mgt., LLC v Rhone Group L.L.C., 78 AD3d 442, 443 [2010]), the complaint fails to allege facts apprising Sacco of the basis of his individual liability. The complaint does not allege that Sacco personally committed a fraudulent act. Nor does the complaint allege that the law firm is a general partnership or that, as such, Sacco may be held individually liable pursuant to Partnership Law § 26 (a) (1). Furthermore, the complaint does not allege that the law firm is a registered limited liability partnership, but that Sacco supervised Fillas in the commission of a fraudulent act, thus rendering Sacco individually liable pursuant to Partnership Law § 26 (c), or that Sacco had previously agreed to assume personal liability for fraudulent acts committed by Fillas, thus rendering Sacco individually liable pursuant to Partnership Law § 26 (d). The allegations in the complaint particularizing Fillas's fraudulent conduct, standing alone, are insufficient to state a cause of action sounding in fraud against Sacco (see Partnership Law § 26 [b], [d]; Selechnik v Law Off. of Howard R. Birnbach, 82 AD3d at 1079). Accordingly, the Supreme Court should have granted that branch of the defendants' motion which was to dismiss the fraud cause of action insofar as [*3]asserted against Sacco."

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You Did Well Enough, Now Go Home

Courts do not apply legal malpractice law in a vacuum.  Far more than in other areas of the law, Courts engage in finding ways to explain the attorney's conduct, or in finding explanations.  Fielding v Kupferman  2013 NY Slip Op 02008 [104 AD3d 580]  March 26, 2013  Appellate Division, First Department is no exception.  Plaintiff points out mistakes by the attorney.  The Court then tells plaintiff that he did well enough in the case, please stop pointing out other mistakes and be happy with what he got.

"Defendants established their entitlement to judgment as a matter of law in this action alleging legal malpractice. Defendants submitted evidence showing that the divorce settlement, in which plaintiff achieved his goal of retaining the parties' marital residence, was advantageous to plaintiff, and resulted in his receiving consideration that more than compensated him for the allegedly unforeseen tax consequences of liquidating his Keogh account (see e.g. Kluczka v Lecci, 63 AD3d 796, 798 [2d Dept 2009]). Defendants also submitted evidence demonstrating that the subject tax consequences were discussed with plaintiff during the course of the settlement negotiations.

In opposition, plaintiff failed to raise a triable issue of fact. His argument that if he had been properly advised on the tax consequences, he would have reached a better settlement or outcome after trial, is speculative (see Kluczka at 798). Plaintiff failed to take into account the benefits he received in the actual settlement, including buying out his wife's share of the marital residence based on an outdated appraisal that assigned a value that was significantly lower than the actual value at the time the agreement was executed. Moreover, plaintiff failed to provide proof of any ascertainable actual damages sustained as a result of the alleged negligence (see Lavanant v General Acc. Ins. Co. of Am., 212 AD2d 450 [1st Dept 1995]). [*2]

Under the circumstances presented, plaintiff's claim for disgorgement of legal fees already paid was properly dismissed (see Reisner v Litman & Litman, P.C., 95 AD3d 858 [2d Dept 2012]; compare Boglia v Greenberg, 63 AD3d 973, 976 [2d Dept 2009]). Concur—Gonzalez, P.J., Sweeny, Renwick, Manzanet-Daniels and Román, JJ. [Prior Case History: 2011 NY Slip Op 31983(U).]

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