New York Attorney Malpractice Blog

New York Attorney Malpractice Blog

The Crime-Fraud Exception to Privilege

Posted in Legal Malpractice Cases

We started the discussion of attorney-client privilege on Friday.  In this case, plaintiff  loaned money to corporation, and eventually, the corporation stops paying it back.  From there, the UCC-1, Security Agreements and Transfers are simply too complicated for a blog entry such as this.  Suffice it to say, there are multiple law firms, making multiple claims against the parties and eachother, and a huge question of attorney-client privilege.  Justice O’Neill Levy sorts it all out in a primer on attorney -client privilege in Priestley v Panmedix Inc. 2017 NY Slip Op 30054(U)  January 12, 2017 Supreme Court, New York County, Docket Number: 114874/10.  Today we examine the crime-fraud exception to attorney-client privilege.

“Crime Fraud Exception

“A party may not invoke the attorney-client privilege where ‘it involves client communications that may have been in furtherance of a fraudulent scheme, an alleged breach of fiduciary duty or an accusation of some other wrongful conduct.'” Art Capital Group LLC v Rose, 54 AD3d 27 6 I 277 (1st Dept 2008) I quoting Ulico Cas. Co. v Wilson, Elser, Mo-skowitz, Edelman & Dicker, 1 AD3d 223, 224 (1st Dept 2003). “A party seeking ‘to invoke the crime-fraud exception must demonstrate that there is a factual basis for a showing of probable cause to believe that a fraud or crime has been committed and that the communications in question were in furtherance of the fraud or crime.'” Matter of New York City Asbestos Litig., 109 AD3d 7, 10-11 · (lst Dept 2013), quoting United States v Jacobs, 117 F3d 82, 87 (2d Cir 1997) (other citations omitted). The crime-fraud exception also applies· to the attorney work product privilege. See Meyer v Kalanick, F Supp 3d, 2016 WL 3981369 , * 5 , * 6 n 5 , 2016 US Dist LEXIS 96583, *16, *22 n 5 (SD NY 2016) .

A Complicated Commercial Case Yields A Comprehensive Guide to Privilege

Posted in Legal Malpractice Cases

Clients loan money to corporation, and eventually, the corporation stops paying it back.  From there, the UCC-1, Security Agreements and Transfers are simply too complicated for a blog entry such as this.  Suffice it to say, there are multiple law firms, making multiple claims against the parties and eachother, and a huge question of attorney-client privilege.  Justice O’Neill Levy sorts it all out in a primer on attorney -client privilege in Priestley v Panmedix Inc.
2017 NY Slip Op 30054(U)  January 12, 2017 Supreme Court, New York County, Docket Number: 114874/10.  On Monday, we will highlight the question of work-product privilege, which is different.

“In April 2001, Priestley loaned $750,000 to Panmedix, pursuant to a senior security promissory note and a patent security agreement, which granted plaintiff a security interest in, respectively~ Panmedix’s personal property and patents. Plaintiff recorded her security interests by filing a UCC financing statement (UCC-1). The loan was to mature in a year. By March 2005, Panmedix had stopped making payments to plaintiff on the loan. In 2007, plaintiff sued in federal court to recover the amount owed, and, in 2008, obtained a judgment against Panmedix and others in the amount of approximately $1.million. Priestley v Comrie, 2007 WL 4208592, 2007 US Dist LEXIS 87386 (SD NY 2007). Because Panmedix was financially unable to pay the judgment, plaintiff and Panmedix entered into a payment agreement, providing that payment to plaintiff would be made from the sale of the company and other possible transactions. When no sale or other transactions occurred, and plaintiff was not paid, she contacted the federal court, in or around June 2009, seeking an order of attachment, and was advised that it would be faster to take her judgment to the marshal. and levy on the assets. See generally Priestley v Panmedix.Inc., 18 F Supp 3d 486, 490-491 (SD NY 2014). Plaintiff asserts that she and Comrie, President and CEO of Panmedix; subsequently began negotiating another payment agreement. (see the case for much, much more detail)

“”The attorney-client privilege shields from disclosure any confidential communications between an attorney and his or her client made for the purpose of obtaining or facilitating legal advice in the course of a professional relationship.” Ambac Assur. Corp. v Countrywide Home Loans, Inc., 27 NY3d 616, 623-24 (2016); see Madden -v Creative Servs., Inc., 84 NY2d 738, 745 ( 1995) . Recognized at common law and codified in CPLR 4503 (a), the attorney-client privilege “fosters the· open dialogue between lawyer and client that is deemed effective representation” (Spectrum Sys. Intl. Corp. v Chemical Bank, 78 NY2d 371, 377 [1991]), and “exists to ensure that one seeking legal advice will be able to confide,  fully and freely in his [or her] attorney, secure in the knowledge that his [or her] confidences will not later be exposed to public view to his [or her] embarrassment or legal detriment.” Matter of Priest v Hennessy, 51 NY2d 62, 67-681 (1980). “The privilege belongs to the client” (People v Osorio, 75 NY2d at 84) and “is intended to protect the client., Matter of Tartakoff  v. New York State Educ. Dept., 130 AD3d 1331, 1333 (3d Dept 2015); see Arkin Kaplan Rice LLP v Kaplan, 107 AD3d 502, 503 (Pt Dept 2013).

“The privilege, however, is not limitless.” Matter of Priest, 51 NY2d at 68. It “must be narrowly construed because it is at odds with the general policy of this State favoring liberal ‘ discovery, and the party asserting the privilege bears the burden of establishing that it applies.” ACE Sec. Corp. v DB Structured Prods., Inc., 40 NYS3d 723, 732, 2Q16 NY Siip Op 26337 (Sup Ct, NY County 2016), citing Ambac Assur. Corp., 27 NY3d at 624, citing Spectrum Sys. Intl. Corp., 78 NY2d at 377; see Matter of Priest, 51 NY2d at 68-69; NAMA Holdings, LLC v Greenberg Traurig LLP, 133 AD3d 46, 52 (Pt Dept 2015). The privilege also “is subject to exceptions, both legislative and Judge-made.” Madden, 84 NY2d at 745 (citations omitted) . Such an exception, for example, at issue in this case, is the “crime fraud exception.” Also at issue here, while the privilege generally is waived where confidential communications are shared with third parties, an exception may apply to communications between and among jointly represented clients and their attorney. 27 NY3d at 624-625. “

In The Third Round, A Knockout

Posted in Legal Malpractice Cases

The danger and beauty of contingent fee arrangements is that this method of risk allocation recognizes that while the attorney may make a large sum of money, there is the attendant risk that there will be no fee at all.  For the client, as has been well-recognized over the years, this arrangement allows for representation where the client cannot afford an attorney.  The rub comes when there is a good or very good result, and the client feels that there is no longer a reasonable link between effort and fees.

 Cohen v Hack  2017 NY Slip Op 30070(U)  January 9, 2017 Supreme Court, New York County Docket Number: 159052/12  Judge: Gerald Lebovits is a perfect example.  Client wanted to get his disability insurance paid, but when he succeeded, he thought, why should the attorneys get 1/3 of my money for the rest of my life?

“Plaintiff alleges that on April 23, 2008, he met with Evan Schwartz, a member of the law firm of Quadrino & Schwartz, P.C. (the law firm), and that he and Schwartz, on the law firm’s behalf, executed a retainer agreement (the initial retainer) to represent him in connection with filing long-term disability claims against Guardian Life Insurance Company of America (Guardian) and New York Life Insurance Company (NY Life) (plaintiff affidavit, 1, 2; plaintiff EBT at 26-28). ”

“Plaintiff contends that he provided the necessary financial documentation to the law firm to enable it to prosecute his claim (plaintiff affidavit, 3). Plaintiff states that in May 2009, he was advised that Guardian had denied his claim for disability benefits, that he was not advised of an appeal procedure, but that he was told that if he did not pay the then-outstanding balance of accrued legal fees of approximately $17,000, the law firm would withdraw from representing him (id.,  7-9; plaintiff EBT at 29, 34-37, 42-43). Plaintiff further states that on July 24, 2009, he was advised that the only way to contest Guardian’s denial of his claim was to commence a lawsuit against it and that this required a new retainer agreement (the lawsuit retainer) (plaintiff affidavit,  10-11; plaintiff EBT at 35-37, 51-54). On July 24, 2009, plaintiff and Schwartz, on the law firm’s behalf, executed the lawsuit retainer (plaintiff affidavit,  11-14 ). ”

“On August 5, 2009, the law firm electronically filed a summons and complaint in Supreme Court, New York County, under index number 111342/2009: Brian Cohen v The Guardian Life Insurance Company of America (the lawsuit). In November 2009, the lawsuit was settled and, under the terms of the settlement, plaintiff received a monthly disability payment of $5, 181. He contends that the one-third contingency fee owing to the law firm under the lawsuit retainer is excessive. ”

“Plaintiffs cross-motion for summary judgment seeking rescission of the lawsuit retainer is denied because plaintiff has not shown “by clear and convincing evidence” (Executive Risk, 56 AD3d at 206) “a unilateral mistake where the enforcement of the contract would be unconscionable” (William E. McClain Realty, 144 AD2d at 218) or a “mutual mistake” (Silver, 7 AD3d at 781 ). Also, plaintiff has offered no reason to vary from “the general rule … that a party may not obtain summary judgement on an unpleaded cause of action” (Pludeman, 106 AD3d at 616, quoting Weinstock, 254 AD2d at 166). Plaintiff contends that the law firm has engaged in excessive and improper billing and, thus, was not entitled to the outstanding balance or the one-third contingency fee. But “[a]bsent incompetence, deception or overreaching, contingent fee agreements that are not void at the time of inception should be enforced as written [and] ‘the power to invalidate fee agreements with hindsight should be exercised only with great caution”‘ (Matter of Lawrence, 24 NY3d at 339, quoting Lawrence v Graubard Miller, 11 NY3d 588, 596 n 4 [2008]). ”

“The contingent-fee arrangement of one-third of the recovery under the terms of the lawsuit retainer has not been shown to be unreasonabie and the court notes that plaintiff had executed similar contingency-fee agreements providing for a one-third recovery in other lawsuits (id. at 18-23). For a court to engage in “hindsight analysis of contingent fee agreements not unconscionable when made is a dangerous business, especially when a [court’s] determination of unconscionability is made solely on the basis that the size of the fee seems [in retrospect to be] too high to be fair” (Matter of Lawrence, 24 NY3d at 340). Defendants have shown that they acted according to the terms of the initial retainer, the la~suit retainer, and the addendum. A court should “enforce clear and complete documents, like [these agreements] according to their terms” (see id at 341 ). Defendants’ motion to dismiss plaintiffs remaining breach-of-contract cause of action, and this action, is granted. ”


A Decision So Normal that It is Unexpected

Posted in Legal Malpractice Cases

Westchester Hills Golf Club, Inc. v Panken  2017 NY Slip Op 30045(U)  January 10, 2017
Supreme Court, New York County  Docket Number: 155528/2016  Judge: Cynthia S. Kern is a decision on a CPLR 3211 motion in a legal malpractice setting.  We have become  accustomed to reading 3211 decisions where the Court goes well beyond the settled standard and reaches arguments on the “but for” portion of the case or on attorney judgment that go beyond the pale.  Here, Judge Kern assiduously tracks the proper standard and scrutinizes the pleadings.

“Plaintiff operates a golf course, clubhouse and restaurant for its members which is located in White Plains, New York. The full-time bartenders, wait staff and kitchen employees of the restaurant are members of Unite Here Local 100 of New York and Vicinity (the “Union”). Plaintiff retained defendants to be general counsel with respect to plaintiff’s labor and employment issues, specifically to negotiate labor agreements with the Union and to address disputes between plaintiff and those employees who were Union members. Plaintiff alleges that defendants negligently handled two employee disputes between 2009 and 2013 regarding Timothy Cremin (“Cremin”), a bartender and Union member, and Mark Wills (“Wills”), a line cook/chef and Union member. ”

“Legal malpractice is defined as the failure of an attorney to “exercise that degree of skill commonly exercised by an ordinary member of the legal community.” Estate of Nevelson v. Carro, Spanbock, Kaster & Cuijfo, 259 A.D.2d 282, 284 (1st Dept 1999). To sufficiently plead a claim for legal malpractice, a plaintiff must allege “(l) that the attorney was negligent; (2) that such negligence was the proximate cause of plaintiffs losses; and (3) proof of actual damages.” Brooks v. Lewin, 21 A.D.3d 731, 734 (1st Dept 2005). The court first turns to defendants’ motion to dismiss the complaint on the ground that the complaint fails to sufficiently allege that defendants’ conduct in both the Cremin matter and the Wills matter was the proximate cause of plaintiffs damages. In order to sufficiently allege proximate cause in a legal malpractice action, a plaintiff must allege “that but for the attorney’s negligence, (plaintiff] would have prevailed in the underlying matter or would not have sustained any ascertainable damages.” Brooks, 21 A.D.3d at 734.

In the present case, this court finds that the complaint sufficiently alleges that defendants’ conduct in the Wills matter was the proximate cause of plaintiffs damages. The complaint alleges that “but for [defendants’] malpractice, … Wills'[] grievance would have been dismissed” and that plaintiff would not have been damaged. Specifically, the complaint alleges that defendants’ conduct in failing to move to stay the arbitration based on the fact that Wills was not covered under the CBA and in failing to assert the defense of untimeliness, which was then waived, proximately caused plaintiffs damages in that plaintiff had to prepare for the scheduled arbitration hearing, engage in settlement negotiations with Wills and eventually settle the matter with Wills, causing plaintiff to incur damages from the settlement as well as the payment ofa $2,000 arbitrator fee and the fee for late cancelation of the arbitration. The complaint further asserts that but for defendants’ failure to properly litig!lte the Wills matter, the grievance would have been dismissed and plaintiff would not have negotiated with Wills or agreed to settle Wills’ grievance. To the extent defendants assert that the portion of the complaint that alleges malpractice with respect to the Wills matter must be dismissed based on the fact that plaintiff voluntarily agreed to settle the Wills matter, such assertion is without merit. “Where the termination [of the underlying case] is by settlement rather than by a dismissal or adverse judgment, malpractice by the attorney is more difficult to establish, but a cause of action can be made out if it is shown that assent by the client to the settlement was compelled because prior misfeasance or nonfeasance by the attorneys left no other recourse.” Becker v. Julien, Blitz & Schlesinger, P.C., 95 Misc.2d 64, 66 (Sup. Ct. N.Y. County, Special Term, 1977)(emphasis added). Indeed, “the cause of action for legal malpractice must stand or fall on its own merits, with no automatic waiver of a plaintiffs right to sue for malpractice merely because plaintiff had voluntarily agreed to enter into a stipulation of settlement.” Id. Here, plaintiff has alleged that it negotiated a settlement with Wills based on defendants’ negligence in litigating the Wills matter. ”

“To the extent defendants assert that the complaint should be dismissed on the ground that it fails to set forth the amount of damages purportedly sustained by plaintiff in the Wills matter, such assertion is without merit as defendants have failed to provide any basis for the proposition that plaintiff is required to plead the exact amount of damages it has sustained. With regard to damages, all that a plaintiff is required to plead in a legal malpractice action is that it has sustained actual and ascertainable damages. The court next turns to defendants’ motion to dismiss the complaint on the ground that defendants’ alleged conduct is protected by the attorney judgment rule. Under the attorney judgment rule, “[a]ttorneys may select among reasonable courses of ac.tion in prosecuting their clients’ cases without thereby committing malpractice so that a purported malpractice claim that amounts only to a client’s criticism of counsel’s strategy may be dismissed.” Dweck Law Firm v. Mann, 283 A.D.2d 292, 293 (I st Dept 2001)(internal citation omitted). Indeed, “[a]ctions or conduct which constitute an error of judgment or are found to constitute one of several alternative ways in which a reasonable prudent attorney would proceed, are not actionable as legal malpractice.” Gonzalez v. Ellenberg, 5 Misc.3d 1023 at *6 (Sup. Ct. N.Y. County 2004). “

A Bad Liability Case, A Bad Faith Claim and Legal Malpractice

Posted in Legal Malpractice Cases

Taxi jumps a curb and strikes a person simply standing there.  Excuse by the licensed taxi driver is that he pushed the gas and brake at the same time. Injured Plaintiff is awarded partial summary judgment and negotiations start from there.  Eventually the case is settled well in excess of the policy limits. Is there a bad faith claim against the insurer and is there a legal malpractice claim against the defense law firm?  Will there eventually be a legal malpractice claim by the insurance company against their attorneys?

Jacal Hacking Corp. v American Tr. Ins. Co.  2017 NY Slip Op 30031(U)  January 6, 2017
Supreme Court, New York County  Docket Number: 154248/12  Judge: Joan A. Madden says there may be a bad faith claim but that there is no legal malpractice claim.  It does not address the third question.

“In this action, plaintiff Jacal Hacking seeks damages against American Transit for bad faith refusal to settle an action to recover damages for personal injuries entitled Jishan Ahmad v. Bivomi M. Alshorbagi and Jacal Hacking Corp (Index No. 115755/08, Supreme Court, New York County) (the “underlying action”). Jacal Hacking also seeks damages against the Baker firm for legal malpractice in connection with its representation of Jacal Hacking in the underlying action. The underlying action involved a motor vehicle accident that occurred on May 11, 2007.

Plaintiff in the underlying action, Ahmad, was standing on the sidewalk at LaGuardia Airport, near the taxi holding area, when a taxi owned by Jacal Hacking and driven by Alshorbagi, jumped the curb and struck him. According to the police accident report, Alshorbagi stated that he accidentally pressed the gas and brake pedals at the same time. Jacal Hacking was insured by American Transit under a policy providing liability insurance coverage with a limit of $100,000 per person and a maximum of $300,000 per accident. American Transit assigned the Baker firm to defend Jacal Hacking, and assigned separate counsel for Alshorbagi.

On April 7, 2010, the Hon. George J. Silver issued a decision and order awarding plaintiff Ahmad partial summary judgment on the issue of liability. The trial on damages commenced on February 16, 2011, and the jury returned a verdict in favor of Ahmad, awarding damages in the total amount of $800,000. Defendants appealed and by a stipulation dated January 24, 2012, the parties agreed to settle the action for $410,000, with American Transit paying Ahmad $250,000 ($100,000 on the policy and an additional $150,000) and the Sheriff $5,000, and Jacal Hacking paying Ahmad $150,000 and the Sheriff $5,000.”

“First, as to the claim against American Transit, it is “well settled that an insurer may be held liable for damages to its insured for the bad faith refusal of a settlement offer.” Smith v. General Accident Insurance Co, 91NY2d648, 652 (1998). ”

“”Bad faith is established only ‘where the liability is clear and the potential recovery far exceeds the insurance coverage.”‘ Id (quoting DiBlasi v. Aetna Life & Casualty Insurance Co, 147 AD 93, 98 (2″d Dept 1989). “The bad-faith equation must include consideration of all of the facts and circumstances relating to whether the insurer’s investigatory efforts prevented it from making an informed evaluation of the risks of refusing settlement.”

“Applying the foregoing standards, the issue of American Transit’s bad faith cannot be resolved as a matter of law. Contrary to Jacal Hacking’ s assertion, the record as a whole, as presented on the motions, does not clearly and conclusively establish bad faith as defined by the Court of Appeals, i.e. that American Transit engaged in a pattern of behavior evincing a conscious or knowing indifference to the probability that Jacal Hacking would be personally accountable for a large judgment if a settlement offer within the policy limits were not accepted. Pavia v. State Farm Mutual Insurance Automobile Insurance Co, supra. Although liability was clearly determined against Jacal Hacking in April 2010 when Ahmad was awarded partial summary judgment, the record is otherwise inconclusive as to other factors bearing on the issue of bad faith. Those factors include but are not limited to whether Ahmad would have actually accepted a settlement within the limits of the policy at some time before or during trial, whether it was “highly probable” that the nature of Ahmad’s injuries and the specific circumstances surrounding the accident would result in a large verdict in excess of the policy limits, and whether American Transit kept Jacal Hacking informed of the status of settlement offers and negotiations both before and during trial. See Smith v. General Accident Insurance Co, supra; Pavia v. State Farm Mutual Automobile Insurance Co, supra. ”

“In any event, even assuming without deciding that the Baker firm was negligent in failing to communicate directly and personally with Jacal Hacking as to the status of the settlement negotiations and trial, Jacal Hacking cannot establish that such negligence was a proximate cause of the loss sustained, i.e. that but for the attorney’s negligence, the underlying action would have settled for $75,000 and Jacal Hacking would not have sustained any damages. While Jacal Hacking asserts that it lost an opportunity to settle the underlying action for $75,0000, the undisputed record shows that American Transit was solely responsible for making the decisions as to the amounts offered in settlement and the timing of each settlement offer. Notably, Jacal Backing’s general manager, Natalia Sorkin, admits as much when she states that if they had 1 · known about the underlying action and the settlement offers and demands, “we would have demanded that American Transit meet the demands of plaintiff and settle at $75,000.” Under the circumstances presented, the alleged malpractice relates to allegations of bad faith on the part of the insurer. As noted above, an insurer’s failure to communicate with its insured and keep it informed of the status of settlement offers and negotiations can constitute some evidence of bad faith. See Smith v. General Accident Insurance Co, supra at 653. Thus, given the absence of causation, Jacal Hacking cannot maintain a claim for legal malpractice and the Baker firm is entitled to summary judgment. See Leder v. Spiegel, supra. “

As In Legal Malpractice, So In Accounting Malpractice

Posted in Uncategorized

There are some differences between legal malpractice and accounting malpractice, but far more similarities.  One major difference, as set forth in New York State Workers’ Compensation Bd. v Fuller & LaFiura, CPAs, P.C.  2017 NY Slip Op 00225  Decided on January 12, 2017
Appellate Division, Third Department is that traditionally accountants do work in one tax-year increments which affects calculation of the statute of limitations.  “As for the cause of action asserted against Fuller for professional negligence, we cannot agree with plaintiff’s argument that the doctrine of continuous representation applies to toll the applicable three-year statute of limitations until Fuller delivered its last audited financial statement on May 4, 2011. It is well settled that “‘[t]he 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'” (Deep v Boies, 121 AD3d 1316, 1318 [2014], lv denied 25 NY3d 903 [2015], quoting McCoy v Feinman, 99 NY2d 295, 306 [2002]; see Giarratano v Silver, 46 AD3d 1053, 1055 [2007]). However, the existence of a continuing, general, professional relationship is insufficient to invoke this doctrine. Instead, the doctrine applies only in the narrow circumstance “where the continuing representation pertains specifically to the matter in which . . . the alleged malpractice” occurred (Shumsky v Eisenstein, 96 NY2d 164, 168 [2001]; accord Deep v Boies, 121 AD3d at 1318; seeChicago Tit. Ins. Co. v Mazula, 47 AD3d 999, 1000 [2008]). Here, we agree with Supreme Court that the allegations of professional malpractice against Fuller are exclusively directed at the separate and discrete yearly audited financial statements that Fuller prepared (see 12 NYCRR 317.19 [a] [2]). In addition, plaintiff has not alleged that it engaged Fuller to provide corrective or remedial services after Fuller submitted the financial statements or that plaintiff and Fuller explicitly contemplated further services regarding completed financial statements (see Williamson v PricewaterhouseCoopers LLP, 9 NY3d at 11). Under these circumstance, Supreme Court properly found that the continuous representation doctrine was inapplicable (see id. at 10-11; Rodeo Family Enters., LLC v Matte, 99 AD3d 781, 784 [2012]; Giarratano v Silver, 46 AD3d at 1055). Accordingly, the cause of action for professional negligence is time-barred to the extent that it alleges actions occurring prior to May 31, 2010.”

In so many other ways, they are similar.  “We find merit in plaintiff’s contention that Supreme Court erred in dismissing the breach of fiduciary duty claim asserted against Fuller (tenth cause of action). Although the duty owed by an accountant is generally not fiduciary in nature (see Bitter v Renzo, 101 AD3d 465, 465 [2012]; Caprer v Nussbaum, 36 AD3d 176, 194 [2006]), a fiduciary relationship exists where the accountant is “under a duty to act for or to give advice for the benefit of [the client] upon matters within the scope of the relation” (EBC I, Inc. v Goldman, Sachs & Co., 5 NY3d 11, 19 [2005] [internal quotation marks and citation omitted]; see Oddo Asset Mgt. v Barclays Bank PLC, 19 NY3d 584, 592-593 [2012]). This inquiry is “necessarily fact-specific” (Marmelstein v Kehillat New Hempstead: Rav Aron Jofen Community Synagogue, 11 NY3d 15, 21 [2008] [internal quotation marks and citation omitted]), and the dispositive factor is whether there is “confidence on one side and resulting superiority and influence on the other” (New York State Workers’ Compensation Bd. v SGRisk, LLC, 116 AD3d 1148, 1152 [2014] [internal quotation marks and citations omitted]; see AG Capital Funding Partners, L.P. v State St. Bank & Trust Co., 11 NY3d 146, 158 [2008]). Plaintiff alleged that Fuller held itself out to have the requisite skill and expertise to maintain the trust’s financial records, provide auditing services and — [*2]importantly — provide advice to the trust regarding the trust’s financial status. According to plaintiff, Fuller breached its fiduciary duty by knowingly and consistently concealing the trust’s true financial condition and failing to properly advise the trust regarding its solvency, causing over $8 million in damages. Accepting these allegations as true and giving plaintiff the benefit of every favorable inference (see Chanko v American Broadcasting Cos. Inc., 27 NY3d 46, 52 [2016]), we find that plaintiff’s cause of action for breach of fiduciary duty is sufficiently stated to survive Fuller’s motion to dismiss (see New York State Workers’ Compensation Bd. v SGRisk, LLC, 116 AD3d at 1153).”

And The Other Shoe Drops in this Dismissal

Posted in Legal Malpractice Cases

Barrett v Goldstein 2017 NY Slip Op 30011(U) January 4, 2017 Supreme Court, New York County Docket Number: 154225/2016 Judge: Arlene P. Bluth is the second half of a two-part decision arising from a divorce mediation which went wrong for plaintiff.  Yesterday, we saw that the mediator was let out of the case.  Today, plaintiff’s attorneys get out too.

“This action arises out of a post-nuptial agreement signed by plaintiff and his wife (Lore~ Comstock) on July 22, 2013. Plaintiffs complaint alleges that defendant Lori Goldstein acted as a mediator between Comstock and plaintiff and that Goldstein helped draft the post-nuptial agreement. Defendants claim they were counsel to plaintiff in connection with the review of Goldstein’s draft agreement and in a subsequent divorce proceeding (initiated in October 2013) for five months, after which plaintiff retained new counsel. Plaintiff claims that defendants failed to advise him that he was waiving certain rights in the post-nuptial agreement and that defendants failed to help plaintiff challenge the validity of the agreement in the divorce litigation. The nature of the instant dispute centers on the plaintiffs unhappiness with the post-nuptial agreement’s distribution of certain assets, including Comstock’s therapy business and plaintiffs farm. ”

“Defendants claim that dismissal is warranted because the language of the post-nuptial agreement refutes plaintiffs claims and plaintiff fails to allege facts demonstrating that defendants’ acts were the ‘but for’ cause of plaintiffs loss or that plaintiff suffered any damages. Defendants further assert that plaintiffs subsequent counsel retained in the divorce action had a chance to challenge the validity of the post-nuptial agreement (and chose not to) and that plaintiffs claims of legal malpractice and breach of fiduciary duty are duplicative. Defendants contend that documentary evidence refutes plaintiffs allegations and demonstrates that plaintiff entered into the post-nuptial agreement willingly and with an understanding of its terms. In opposition, plaintiff claims that the legal advice provided by defendants was incompetent because the terms of the post-nuptial agreement were clearly one-sided in favor of Comstock. Plaintiff asserts that defendants did not educate plaintiff about the financial rights waived in the agreement, especially those rights relating to Comstock’s therapy practice. Plaintiff also cites to a legal fees provision in the post-nuptial agreement as proof that defendants did not competently represent plaintiff. Plaintiff argues that the ‘but for causation’ test is satisfied for his legal malpractice claim because he never would have signed the post-nuptial agreement if defendants had properly advised him. Plaintiff asserts that he would have maintained his right to Comstock’s therapy practice and preserved his separate property (the farm). Plaintiff claims that defendants’ improper filing of the divorce action triggered a “poison pill” provision in the postnuptial agreement, which made it far too risky to challenge the terms of the post-nuptial agreement. Plaintiff claims that his damages (the value of the waived equitable distribution rights) can be determined by experts. ”

“Taken together, these provisions utterly refute the allegations in the complaint. They evidence an agreement whereby plaintiff explicitly acknowledged that he might be giving up some rights, that he viewed these provisions as fair and reasonable, and that he was aware of Comstock’ s financial information. Plaintiff does not dispute that he signed the agreement or claim that he did not understand the provisions. Instead, he asks this Court to find that because (in his view) the agreement is one-sided in Comstock’s favor, no competent lawyer would have let plaintiff sign it. This unsubstantiated claim is not enough to defeat an agreement that states that the post-nuptial agreement was reasonable, that the financial consequences were understood by plaintiff, and that the agreement was entered into voluntarily. The challenged parts of the agreement are written simply; there is no “legalese”. Plaintiff is bound by his signature on an agreement that specifically (and clearly) states that he understood its terms (Bishop v Maurer, 33 AD3d 497, 499, 823 NYS2d 366 [1st Dept 2006]). The Court declines to fundamentally change the terms of an unambiguous postnuptial agreement because plaintiff, with the benefit of hindsight, dislikes its effects. Besides, defendants also submitted emails demonstrating that plaintiff was indeed fully aware of the terms discussed. In fact, Goldstein (the drafter of the agreement) asked whether plaintiff had any further comments or questions about the agreement after receiving an email from Comstock (on which plaintiff was also a recipient) noting that the “farm is fine” (affirmation of defendants’ counsel exh C). Plaintiff responded “no” to this email (id.). Defendants also attached email correspondence that specifically mentions that plaintiffs attorney reviewed the agreement and provided some comments (id. exh E). Plaintiff sent an email to Goldstein stating that it was always his intention to transfer the title to the farm to himself and Comstock (id.). ”



Not Your Attorney? Then No Legal Malpractice Claim

Posted in Uncategorized

Divorce is a huge step.  It ends a marriage and brings with it seismic shock.  When (as always) this type of event is coupled with legal representation, the client will often blame the attorney for the outcome.  Sometimes this is warranted, and sometimes not.  Barrett v Goldstein 2017 NY Slip Op 30010(U) January 3, 2017 Supreme Court, New York County Docket Number: 154225/2016 Judge: Arlene P. Bluth (which we will call Barrett 1 ) is an example of the latter.

This defendant was a mediator in a mediated divorce.  When plaintiff discovered that he had given away inherited non-marital property he sued everyone.  In Barrett 1 he unsuccessfully sued the mediator.

“Goldstein claims that the post-nuptial agreement signed by plaintiff and Comstock states ‘ that each party had their own legal counsel advising them regarding the effects of the post-nuptial agreement. Goldstein claims that plaintiff failed to state a cause of action for legal malpractice/breach of fiduciary duty because plaintiff failed to establish the existence of an attorney-client relationship. Goldstein further claims that even if there was an attorney-client relationship, plaintiff failed to plead facts to establish that ‘but for’ Goldstein’s alleged negligence, plaintiff would have received a larger distribution of the marital estate. Goldstein asserts that the complaint does not state what occurred in the divorce action and how the marital property was eventually divided, thereby precluding a finding of legal malpractice. Goldstein further argues that the cause of action for breach of fiduciary duty and fraud are duplicative of the cause of action for legal malpractice and, therefore, must be dismissed. In opposition, plaintiff disputes that Goldstein was a mediator and claims that Goldstein was hired by Comstock. Plaintiff insists that he had an attorney-client relationship with Goldstein and declares that the documentary evidence provided by Goldstein does not dispute that characterization. Plaintiff asserts that Comstock became entitled to a fifty percent interest in plaintiffs inherited land and mineral rights to which Comstock would not have otherwise been entitled under equitable distribution. Plaintiff claims the causes of action are not duplicative because if no attorney-client relationship is found, then a cause of action for fraud should remain. ”

“”In determining the existence of an attorney-client relationship, a court must look to the actions of the parties to ascertain the existence of such a relationship” (Wei Cheng Chang v Pi, 288 AD2d 378, 380, 733 NYS2d 471 [2d Dept 2001]). A purp9rted client’s “unilateral beliefs and actions do not confer upon [him] the status of client” (Jane Street Co. v Rosenberg & Estis, P.C., 192 AD2d 451, 451, 597 NYS2d 17 [1st Dept 1993]). Here, plaintiffs complaint attempts to characterize Goldstein’s role as an attorney-client relationship with plaintiff, but plaintiff failed to allege any facts to substantiate this claim. Goldstein also produced documentary evidence that utterly refutes plaintiffs claim that an attorney-client relationship existed. Plaintiffs complaint (Goldstein’s counsel, exh A) attaches a copy of the post-nuptial agreement signed by both plaintiff and Comstock. Paragraph 1.1 of the post-nuptial agreement states that “Each party acknowledges that his or her separate legal counsel has examined the attached financial information, has advised him or her with respect to same, and that each party fully understands the contents of such financial information of the other” (id.). Paragraph 1.2 states that “Each party acknowledges that: (a) he or she has had legal counsel of his or her own selection who advised him or her fully with respect to his or her rights in and to the property and income of the other and with respect to the effect of this Agreement and that such party understands such advice” (id.). This agreement makes clear that each party consulted with his or her own attorney before signing the agreement. Further, plaintiffs complaint supports this conclusion. Plaintiff alleges that defendants Fleischer and Berkman Bottger (the firm) were retained by plaintiff on or about March 22, 2013 to “review the Post-Nuptial Agreement drafted by Defendant Lori H. Goldstein” (plaintiffs complaint~ 51 ). Clearly, plaintiff did_ have his own individual counsel review the agreement before he signed it. ”

“Although Goldstein may have used her legal expertise to draft the agreement, plaintiff did not exclusively rely on that expertise before signing the agreement. He employed his own attorneys for that task. “

All of the 2016 Judiciary Law Cases, Continued

Posted in Legal Malpractice Cases

13.  Emigrant Funding Corp. v Nunez   2016 NY Slip Op 32089(U)  May 25, 2016  Supreme Court, Queens County  Docket Number: 16111/2009  Judge: Robert J. McDonald    Our review of the entire year’s cases highlights the large number of foreclosure actions in which (almost as a reflex) JL 487 claims are raised against both the bank’s attorneys and the borrower’s attorney. Emigrant seems to be one of these.  “In opposition, Helmut Borchert, Esq., a partner of BGS and plaintiff’s counsel in this action, submits an affirmation contending that Nunez’s the issues raised by Nunez are barred by the doctrine of res judicata and were waived by Nunez in the forbearance agreement. Regarding that branch of Nunez’s application pursuant to Judiciary Law 487 and for sanctions, Mr. Borchert argues that Nunez cannot show that plaintiff, BGS, or himself has intentionally mislead the court or Nunez. ”

“Regarding that branch of the application to punish and for sanctions against plaintiff, BGS, and Helmut Borchert, Esq., this Court finds that Nunez has not established an intent to deceive (see Judiciary Law 487; Cullin v Spiess, 122 AD3d 792 [2d Dept. 2014]; Dupree v Voorhees, 102 AD3d 912 [2d Dept. 2013]; Boglia v Greenberg, 63 AD3d 973 [2d Dept. 2009]). ”


14.  GE Oil & Gas, Inc. v Turbine Generation Servs., L.L.C.  2016 NY Slip Op 50825(U) [51 Misc 3d 1226(A)]  Decided on May 27, 2016  Supreme Court, New York County  Kornreich, J.  In a case, “thoroughly papered by the counselled, sophisticated parties” one side nevertheless violated the forum-selection clause in a wholehearted way.  The Court suggested: ” The court will direct an inquest on their contempt if it is not purged. While the question of the damages available for breach of a forum selection clause is somewhat of an uncertain issue under New York law,[FN5] the court’s ability to sanction a party for intentionally violating a court order is not. See Simens v Darwish, 104 AD3d 465, 466 (1st Dept 2013), citing McCormick v Axelrod, 59 NY2d 574, 582-83 (1983); see also Gottlieb, 137 AD3d at 618 (“Legal fees that constitute actual loss or injury as a result of a contempt are routinely awarded as part of the fine. These may include the legal fees incurred in bringing the contempt motion”) (internal citations omitted), accord Judiciary Law § 773 (contemnor may be obligated to pay damages or a fine “sufficient to indemnify the aggrieved party”).[FN6]   “Judiciary Law § 487 also prohibits attorneys from making knowingly false statements to deceive the court. As discussed at the May 18 oral argument, the TGS Parties’ claim in this court and in the Louisiana State Court Action that this court sua sponte dismissed their joint venture claim is false. The dismissal on March 30 was not a sua sponte dismissal without consideration of the merits or the allowance of an opportunity to brief the issues. Rather, the March 30 Order was issued because the joint venture claims were previously argued and ruled on, after extensive briefing, in connection with the summary judgment motion, and the claim was expressly rejected in the SJ Decision. Dismissal of the amended counterclaims in the March 30 Order was due to violation of an order contained in the SJ Decision.”


15.  Pieroni v Phillips Lytle LLP  2016 NY Slip Op 04618 [140 AD3d 1707]  June 10, 2016
Appellate Division, Fourth Department     Not that much different from a foreclosure action, this case involved a Ford dealership.

“Plaintiffs commenced this fraud and Judiciary Law § 487 action against two individual attorneys and their law firm in connection with their representation of Ford Motor Credit Company LLC, formerly known as Ford Motor Credit Company (Ford Credit), in an underlying action (2007 action) commenced by Ford Credit. In the 2007 action, Ford Credit sought damages for breach of a floor plan and security agreement with an automobile dealership. In connection with the 2007 action, Ford Credit obtained an order of seizure with respect to certain vehicles. Ford Credit later amended the complaint therein to add as defendants the plaintiffs in this action, who were the purported buyers or participants in the transfer of those vehicles. In 2010, plaintiffs commenced an action (2010 action) against Ford Credit alleging causes of action for intentional infliction of economic harm, conversion, fraud, and tortious interference with contractual relations. Plaintiffs alleged that Ford Credit knew of the bona fide claims of plaintiffs to the vehicles and submitted false statements in support of its order to show cause to seize the vehicles. Plaintiffs later moved for leave to amend the complaint to add defendants to the 2010 action and to add a cause of action pursuant to Judiciary Law § 487. Supreme Court (Bannister, J.) denied the motion with respect to the individual defendants, and denied the motion with respect to the law firm without prejudice for reconsideration in the event plaintiffs submitted additional proof, as set forth in the court’s bench decision. Plaintiffs did not submit any additional proof, and their subsequent motion for leave to reargue was denied. Although plaintiffs appealed, that appeal was not decided before both the 2007 action and the 2010 action were transferred to federal court.”

“In March 2013, plaintiffs commenced the present action. The complaint is essentially identical to the proposed amended complaint they submitted in support of their motion for leave to amend the complaint in the 2010 action. Supreme Court (Caruso, J.) granted defendants’ motion to dismiss the complaint, and we now affirm.”

” The Judiciary Law § 487 cause of action must also be pleaded with particularity (see Briarpatch Ltd., L.P. v Frankfurt Garbus Klein & Selz, P.C., 13 AD3d 296, 297 [2004], lv denied 4 NY3d 707 [2005]), and plaintiffs failed to do so here (see Savitt v Greenberg Traurig, LLP, 126 AD3d 506, 507 [2015]; Schiller v Bender, Burrows & Rosenthal, LLP, 116 AD3d 756, 758-759 [2014])”

All the Judiciary Law 487 Cases of 2016 (4)

Posted in Legal Malpractice Cases

Continuing on our survey of all the JL 487 cases last year we move on to the spring:

10.  Little Rest Twelve, Inc. v Zajic
2016 NY Slip Op 01767 [137 AD3d 540]
March 15, 2016
Appellate Division, First Department discusses a concept that we will see further refined later:

“As discussed below, the motion to dismiss the third-party complaint was correctly granted. However, since it is based on a failure to state a cause of action, the dismissal should be without prejudice to apply upon a proper showing for leave to plead again (Morpheus Capital Advisors LLC v UBS AG, 105 AD3d 145, 154 [1st Dept 2013], revd on other grounds 23 NY3d 528 [2014]).

Third-party plaintiffs fail to allege a duty owed them by third-party defendants that would support a claim for contribution or indemnification (see Raquet v Braun, 90 NY2d 177, 183 [1997]; Garrett v Holiday Inns, 86 AD2d 469, 471 [4th Dept 1982], mod on other grounds 58 NY2d 253 [1983]).

In support of the claim alleging a violation of Judiciary Law § 487, the third-party complaint contains no nonconclusory allegations that the alleged misconduct was “merely a means to the accomplishment of a larger fraudulent scheme” (Newin Corp. v Hartford Acc. & Indem. Co., 37 NY2d 211, 217 [1975]) “greater in scope than the issues determined in the prior proceeding” (Specialized Indus. Servs. Corp. v Carter, 68 AD3d 750, 752 [2d Dept 2009] [internal quotation marks omitted]). Thus, the claim is not properly asserted in this action but would be appropriately raised in the still pending underlying action, where the alleged [*2]misconduct occurred (see Seldon v Spinnell, 95 AD3d 779 [1st Dept 2012], lv denied 20 NY3d 857 [2013]; Melnitzky v Owen, 19 AD3d 201 [1st Dept 2005]).

11.  Katz v Landsman  2016 NY Slip Op 30533(U)  March 30, 2016  Supreme Court, New York County  Docket Number: 161147/14  Judge: Carol R. Edmead

“This case arises from Landsman’s representation of Katz in a proceeding in Surrogate’s Court in a matter involving a trust created by Katz’s grandmother. While the complaint is short on dates, it is clear that the representation ended when Katz fired Landsman in November 2008. On November 19, 2008, Landsman sent Katz an email notifying him that he would not spend any more time on the matter until Katz paid an outstanding bill, and Katz responded, on the same day, stating that “[w]e concur that you are not to proceed any further on this case until the matter of your presented bill is resolved” (emphasis in original). Landsman, in an affidavit submitted with the motion to dismiss, stated that “[t]he fee issue was not resolved and I did nothing further on Plaintiffs behalf’ (Katz aff, if 3). There is no dispute as to whether Katz’s email constituted termination. Landsman subsequently, in September 2014, brought an action in this court, entitled Landsman v Katz, index No. 652770/14, to recover his fees. That action was before Judge Reed, who granted dismissal without prejudice because Landsman failed to satisfy 22 NYCRR 137. Specifically, Judge Reed held that while Landsman initiated an arbitration in December 2008, he failed “to submit documentary evidence or other proof that a hearing was held before an arbitrator as mandated by 22 NYCRR 137”

In an effort to avoid this result, Katz turiis to a line of cases that holds that violation of the Judiciary Law§ 487, and other intentional torts; are not subsumed by legal malpractice claims !· ii when they arise from the same set of facts (see e.g. Sabalza v Salgado, 85 AD3d 436, 438 [1st Dept 2011] [holding that dismissal of a claim under Judiciary Law§ 487 was “not duplicative of causes of action alleging legal malpractice, since the statutory claim requires an intent to deceive, 1i whereas a legal malpractice claim is based on negligent conduct”]). Katz argues this despite the ii i! fact that the complaint does not contain a claim for violation of Judiciary Law § 487. Instead, Katz claims that he could have brought such a claim.

12.  Sanko v Roth 2016 NY Slip Op 30930(U) May 17, 2016 Supreme Court, New York County Docket Number: 650025/14 Judge: Gerald Lebovits  did not allow amendment of the claim to add a JL 487 claim.

“The proposed amended complaint also alleges that defendant violated Judiciary Law§ 487 by fraudulently commencing the underlying holdover and nonpayment proceedings with the intent to deceive the court, plaintiff, and the adverse parties in the proceedings. The twelfth proposed amendment is devoid of merit. Judicial Law§ 487 allows an injured party to recover treble damages from an attorney if the latter “[i]s guilty of any deceit or collusion, or consents to any deceit or collusion, with intent to deceive the court or any party.” To state a cause of action for violating Judicial Law§ 487, a plaintiff must demonstrate that a nexus exists between defendant’s alleged conduct and any judicial determination. (Weisman, Celler, Spell & Modlin v Chadbourne & Parke, 271 AD2d 329, 330-331 [I st Dept:2000], Iv denied 95 NY2d 760 [2000].) In its order dismissing the petition, Hon. Mark Finkelstein noted that plaintiff notified the court that he had not authorized defendant to commence the Gyllenhaal holdover proceeding on his behalf and represent him in the proceeding. Thus, in the Gyllenhaal holdover proceeding, the court was aware of defendant’s possibly unauthorized commencement of the proceeding. Defendant’s alleged deceit was not a cause of the dismissal of the Gyllenhaal holdover proceeding. And no judicial determination was made in the Albert holdover proceeding and the Albert nonpayment proceeding. The matters were not adjudicated. The Albert holdover proceeding was marked off calendar and the Albert nonpayment proceeding was settled by stipulation on the record. No nexus exists between defendant’s conduct and any judicial determination in the proceedings. Plaintiff is not entitled to leave to amend the complaint. “