New York Attorney Malpractice Blog

New York Attorney Malpractice Blog

A Skirmish on the Way to a Battle

Posted in Legal Malpractice News

When a client has multiple remedies, such as personal injury, wrongful death, pain and suffering, as well as workers’ compensation, sometimes the attorneys focus on one to the detriment of another remedy.  Such is what seems to have happened in Lirano v Grimble & Logudice, LLC    2014 NY Slip Op 32346(U)   September 3, 2014  Supreme Court, New York County  Docket Number: 154676/2013  Judge: Eileen A. Rakower.  The law firm took on a case in which decedent died while working.  Some two years and 5 days later the law firm rejected the case.  Problem?  No WC case started within the 2 year time limit.  Legal Malpractice?  We don’t know yet.  Right now, the parties are skirmishing over discovery.  More answers later.

“As alleged in the Verified Complaint, Decedent suffered injuries in an accident while working on December 21, 2010, at 175 East 96 th Street, New York, New York 10128, and died on December 23, 2010 as a result of his injuries. Plaintiff retained Defendants to “investigate and advise her with respect to all potential claims relating to the accident of December 23, 2010 and Mr. Pena’s death.” The Complaint alleges, by letter dated December 28, 2012, G&L “rejected the case without commencing a lawsuit or filing a Workers’ Compensation claim on behalf of the decedent, Eduardo Pena, or his estate.” It further alleges, “Pursuant to the applicable statute, a Workers Compensation claim must be filed within two (2) years. Therefore, the decedent and/or his estate are precluded from filing a Workers’ Compensation claim as a result of the accident of December 21, 2010.” Plaintiff claims that Defendants were negligent “in not advising the administratrix that the estate had a viable Workers’ Compensation claim; in not informing her that a Workers’ Compensation claim had to be commenced within two (2) years of the date of the accident and in failing to refer her to a lawyer and/or firm that focused on Workers’ Compensation claims and in failing to advise her to consult with a lawyer and/or firm that focused on Workers’ Compensation claims,” and resulting damages. In its Answer, G&L denies that the injuries sustained by Pena on the date of the incident was the sole factor causing Pena’s death because Pena had preexisting medical conditions. Furthermore, G&L contends Decedent was intoxicated at an after-hours Christmas party when the injury occurred, which would not be covered by Workers’ Compensation. G&L further contends that (1) Plaintiff failed to state a cause of action; and (2) Plaintiff was aware that G&L was retained solely with regard to an action based upon negligence of others, and not with respect to a Workers’ Compensation claim. ”

“Wherefore, it is hereby ORDERED that Defendant’s motion is granted to the extent that Plaintiff is directed to supplement Plaintiffs Bill of Particulars with respect to the paragraphs of G&L’s Demand for a Bill of Particulars as referenced above and to produce outstanding discovery that is requested in Defendant’s First Notice for Discovery and Inspection; and it is further ORDERED that Plaintiffs cross motion for a protective order is granted only to the extent that Plaintiff need not supplement any other portions of its Bill of Particulars not identified above. “

The Appellate Division Aligns Some Causes of Action in a Legal Malpractice Case

Posted in Uncategorized

Here is a story which has happened all too often in the past 20 years.

“The plaintiff and the defendant, an attorney licensed in New York, met in or about 2001, when the plaintiff sought the defendant’s legal representation. The parties established a business relationship, which later evolved into a friendship. In 2007, upon the defendant’s recommendation, the plaintiff made an investment of $260,000 in an enterprise known as Agape World (hereinafter Agape), which purportedly used investor money to provide bridge loans to businesses, and paid interest to the investors. The defendant allegedly also invested large sums of his own money in Agape. In 2008, it was revealed that Agape was, in fact, a Ponzi scheme, in which new investors’ funds were used to pay earlier investors’ returns. The plaintiff and the defendant allegedly lost their investments in Agape.”

In Biberaj v Acocella   2014 NY Slip Op 06165 [120 AD3d 1285]  September 17, 2014  Appellate Division, Second Department ( an often cited case), the Appellate Division almost completely realigned the causes of action which were either dismissed or left alone by Supreme  Court.

“Ordered that the order is modified, on the law, (1) by deleting the provision thereof granting that branch of the motion which was for summary judgment dismissing the cause of action to recover damages for legal malpractice, and substituting therefor a provision denying that branch of the motion, and (2) by deleting the provisions thereof denying those branches of the motion which were for summary judgment dismissing the causes of action to recover damages for fraud and breach of contract, and substituting therefor a provision granting those branches of the motion; as so modified, the order is affirmed insofar as appealed and cross-appealed from, without costs or disbursements.

The plaintiff and the defendant, an attorney licensed in New York, met in or about 2001, when the plaintiff sought the defendant’s legal representation. The parties established a business relationship, which later evolved into a friendship. In 2007, upon the defendant’s recommendation, the plaintiff made an investment of $260,000 in an enterprise known as Agape World (hereinafter Agape), which purportedly used investor money to provide bridge loans to businesses, and paid interest to the investors. The defendant allegedly also invested large sums of his own money in Agape. In 2008, it was revealed that Agape was, in fact, a Ponzi scheme, in which new investors’ funds were used to pay earlier investors’ returns. The plaintiff and the defendant allegedly lost their investments in Agape.

[*2] In July 2009, the plaintiff commenced the instant action to recover damages for fraud (first cause of action), breach of fiduciary duty (second cause of action), negligence (third cause of action), money had and received (fourth cause of action), legal malpractice (fifth cause of action), based on a constructive trust (sixth cause of action), and for breach of contract (seventh cause of action). After issue was joined, the defendant moved for summary judgment dismissing the complaint. The Supreme Court granted those branches of the defendant’s motion which were for summary judgment dismissing the causes of action to recover damages for breach of fiduciary duty, negligence, and legal malpractice, and denied the remaining branches of the motion. The defendant appeals and the plaintiff cross-appeals from stated portions of this order.

To recover damages for legal malpractice, a plaintiff must prove the existence of an attorney-client relationship (see Berry v Utica Natl. Ins. Group, 66 AD3d 1376 [2009]; Rechberger v Scolaro, Shulman, Cohen, Fetter & Burstein, P.C., 45 AD3d 1453 [2007]; Moran v Hurst, 32 AD3d 909, 910 [2006]). A plaintiff is also required to establish that the defendant failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession, and that the breach of this duty proximately caused the plaintiff to sustain actual and ascertainable damages (see Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442 [2007]; Gershkovich v Miller, Rosado & Algios, LLP, 96 AD3d 716, 717 [2012]). “To succeed on a motion for summary judgment dismissing the complaint in a legal malpractice action, the defendant must present evidence in admissible form establishing that the plaintiff is unable to prove at least one essential element of his or her cause of action alleging legal malpractice” (Scartozzi v Potruch, 72 AD3d 787, 789-790 [2010]; see Gershkovich v Miller, Rosado & Algios, LLP, 96 AD3d at 717).

Here, in support of that branch of his motion which was for summary judgment dismissing the cause of action to recover damages for legal malpractice, the defendant met his prima facie burden of establishing that he had no attorney-client relationship with the plaintiff referable to the plaintiff’s investment in Agape (see Volpe v Canfield, 237 AD2d 282, 283 [1997]). In opposition, however, the plaintiff raised a triable issue of fact as to the existence of an attorney-client relationship in that context. Moreover, with regard to this cause of action, the defendant failed to show, prima facie, that he exercised the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession in allegedly advising the plaintiff regarding Agape, or that the alleged breach of this duty did not proximately cause the plaintiff to sustain damages. Accordingly, the Supreme Court should have denied that branch of the defendant’s motion which was for summary judgment dismissing the cause of action to recover damages for legal malpractice.

The Supreme Court should have granted those branches of the motion which were for summary judgment dismissing the causes of action to recover damages for fraud and breach of contract as duplicative of the cause of action to recover damages for legal malpractice, because they arose from the same facts as the legal malpractice cause of action, and do not allege distinct damages”

No Deceit Proven; Overbilling, Perhaps

Posted in Legal Malpractice News

Some of the largest law firms in New York are the personal injury giants Jacoby & Meyers LLP and Finkelstein & Partners.  All across upstate New York, wherever there are cars and personal injuries, you’ll find their offices.  One of the institutional problems of the personal injury world is the expense of litigation.  Smaller firms act as banks for their clients.  The firm advances court costs, medical record costs, deposition transcript costs…you get the picture.  Jacoby has its own inhouse bank, which lends money to the client.  This shifts the ultimate cost of credit to the client and away from the law firm.

Rodriguez v Jacoby & Meyers, LLP   2015 NY Slip Op 02427   Decided on March 24, 2015  Appellate Division, First Department is a case which investigates this practice.  Is it proper?  Does it violate contingent fee rules?  Is it deceit ?

The answer to deceit is no.  The balance remains unanswered.

“As to the cause of action for breach of fiduciary duty based on over-billing, the record does not permit a finding as a matter of law as to whether the expenses billed by defendants Total Trial Solutions, LLC (TTS) and Cinetrial Solutions, LLC (CTS), providers of litigation support services, were authorized and were reasonable, since issues of fact exist whether defendant Jacoby & Meyers’s guidelines for the provision of litigation support services were followed and whether TTS and CTS provided services in excess of what had been deemed necessary.

The record does not permit summary dismissal of the complaint on the ground of unclean hands since, in addition to the above-cited issues of fact as to the following of the guidelines for litigation support services, issues of fact exist as to which individual or individuals at Jacoby & Meyers were responsible for litigating the case and for reviewing and approving the litigation support services.

As to the breach of fiduciary duty claim based on a conflict of interest, the retainer agreement clearly disclosed that attorneys had a financial interest in TTS and CTS, and advised plaintiff to seek an independent attorney’s opinion on the issue of case expenses if she felt the need (see generally Halevi v Fisher, 81 AD3d 504 [1st Dept 2011], lv denied 16 NY3d 711 [2011]). Plaintiff presented no evidence either that she had difficulty with English (indeed, her[*2]deposition testimony in English reflects no such difficulty) or that her injury rendered her unable to understand the agreement she signed.

For the same reasons, plaintiff’s contention that defendants committed fraud by omission by concealing their conflict of interest from her is unavailing. Nor does the retainer agreement’s language of “potential” conflict of interest render the disclosure less clear.

As to the breach of fiduciary duty claim based on the alleged filing of an improper retaining lien, it has not been determined whether defendants were discharged for cause (see Teichner v W & J Holsteins, 64 NY2d 977 [1985]; Eighteen Assoc. v Nanjim Leasing Corp., 297 AD2d 358 [2d Dept 2002]).

There is no evidence that defendants engaged in misconduct constituting a violation of Judiciary Law § 487 (see e.g. Lifeline Funding, LLC v Ripka, 114 AD3d 507, 508 [1st Dept 2014]).”

Perjury or Deceit…You Decide

Posted in Legal Malpractice News

Outgoing Supreme Court Justice Milton Tingling gave short shrift to Plaintiff’s argument that Defense counsel had committed a violation of Judiciary Law § 487.  The judge let plaintiff know that enough was enough on this “perjury” thing.  Anyway, read it in  Manhattan Telecom. Corp. v Jackson  2014 NY Slip Op 32053(U)   February 24, 2014   Sup Ct, New York County   Docket Number: 111319-2010  Judge: Milton A. Tingling

 

“The plaintiff moves for an Order seeking the recusal of this Court from the action, and pursuant to CPLR 2221 leave to renew and reargue a prior motion by movant and upon such renewal and/or reargument granting the relief sought and granting such other further and different relief as to this Court may seem just. This Court has made errors in this case. One was being led to believe, after an on off the record conversation with plaintiffs’ counsel in open court that this matter was over. Second, the defendants motion to dismiss the first amended complaint filed in July 2011 should have been granted. As previously stated, this entire matter stems from plaintiffs’ counsel’s fixation on the alleged perjury by defendant in connection with a motion to change venue in a prior action. That action was Manhattan Telecommunications Corp. v. Beauty Pools, Inc., 116386-2008 in which Rachel Jackson was counsel for defendant.

Plaintiffs’ counsel alleged she perjured herself in bringing the motion pursuant to CPLR 511.  The word has consumed this litigation ever since. Perjury, perjury, perjury. Special Affirmation by (Mr. Bachrach) as to perjury by Defendants and Affirmation entitled Perjury or Betrayal. Although the Motion was DENIED, Mr.  Bachrach was incensed. He brought an action against Jackson individually alleging a violation of .Judiciary Law 487. Although the underlying case was settled for less than the minimum monetary jurisdiction of this court, Mr. Bachrach has pursued this action like Sherman marching to the sea. Ignoring the diatribes, monologues, accusations and verbal attacks, the rub here is that there is no action to go forward. Although couched in the language of a .Judiciary Law 487 action, this case is about alleged perjury. As a general rule, there is no civil cause of action for perjury in the State of New York. See Newin Corp. v Hartford Accident and Indemnification Co. 37 N.Y.S.2d 211 and Aufrichtig etc v Lowell 85 N.Y.S.2d 540.

The amended complaint alleges a violation of Judiciary Law sect 487 in that based upon the prior change of venue motion Defendant was guilty of deceit and consented to deceit or collusion with intent to deceive the Court and Plaintiff. .Judiciary Law sect 487 states a cause of action against an attorney who is guilty of any deceit or collusion, or consents to any deceit or collusion with intent to deceive the court or any party.

The application of 487 is constricted to cases where the defendant is found to have intentionally engaged in a chronic, extreme pattern of delinquency, See Havel v Islam  A.D.2 210 and .Jaroslawicz v Cohen 12A.D.3d 160, 161. Here, assuming the allegations of the complaint to be true the Court finds as a matter of law the complaint does not establish  a chronic extreme pattern of delinquency.

Plaintiff Did Not Plead Enough Detail in this Legal Malpractice Complaint

Posted in Legal Malpractice News

Plaintiff is a victim of a rear-end collision.  The case ends up with a victory for plaintiff, but he sues his attorneys on the theory that they waited too long to move for summary judgment.  Plaintiff alleges that he lost 6 years of interest.  By his calculation he lost 54% of the value of the case.  Can this be legal malpractice?  Yes.  Did Plaintiff support his allegations with sufficient factual material?  No.

Rodriguez v Jacoby & Meyers, LLP  2015 NY Slip Op 02151  Decided on March 19, 2015  Appellate Division, Third Department is an example of analysis in a CPLR 3211 case.  The Courts must afford the complaint a liberal construction, but the favorable treatment is not limitless.

“Turning to the merits, the standard to be applied on a motion to dismiss for failure to state a cause of action is both familiar and well settled — “we must afford the complaint a liberal construction, accept as true the allegations contained therein, accord the plaintiff the benefit of every favorable inference and determine only whether the facts fit within any cognizable legal theory” (He v Realty USA, 121 AD3d 1336, 1339 [2014] [internal quotation marks and citations omitted]; see Snyder v Brown Chiari, LLP, 116 AD3d 1116, 1117 [2014]). That said, the “favorable treatment” accorded to a plaintiff’s complaint is not “limitless” (Tenney v Hodgson Russ, LLP, 97 AD3d 1089, 1090 [2012]) and, as such, “conclusory allegations — claims consisting of bare legal conclusions with no factual specificity — are insufficient to survive a motion to dismiss” (Godfrey v Spano, 13 NY3d 358, 373 [2009]; accord Barnes v Hodge, 118 AD3d 633, 633 [2014]; see Wiggins & Kopko, LLP v Masson, 116 AD3d 1130, 1131-1132 [2014]).

“In order to sustain a claim for legal malpractice, a plaintiff must establish both that the defendant attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession which results in actual damages to a plaintiff, and that the plaintiff would have succeeded on the merits of the underlying action but for the attorney’s negligence” (Leder v Spiegel, 9 NY3d 836, 837 [2007], cert denied sub nom. Spiegel v Rowland, 552 US 1257 [2008] [internal quotation marks and citation omitted]; accord Hyman v Schwartz, 114 AD3d 1110, 1112 [2014], lv dismissed 24 NY3d 930 [2014]; see MacDonald v Guttman, 72 AD3d 1452, 1454-1455 [2010]). Although the parties debate whether the decision to bring a summary judgment motion and/or the timing thereof can give rise to a claim for legal malpractice in the first instance (see e.g. Siracusa v Sager, 105 AD3d 937, 938-939 [2013]; Bua v Purcell & Ingrao, P.C., 99 AD3d 843, 846-847 [2012], lv denied20 NY3d 857 [2013]; Hand v Silberman, 15 AD3d 167, 167 [2005], lv denied 5 NY3d 707 [2005]; Palazzolo v Herrick, Feinstein, LLP, 298 AD2d 372, 372-373 [2002]) and, further, whether plaintiff’s damages — in the absence of a final judgment in the underlying personal injury action — are speculative, these issues need not detain us.

To survive defendants’ motion to dismiss, it was incumbent upon plaintiff to, among other things, “plead specific factual allegations establishing that but for counsel’s deficient representation, there would have been a more favorable outcome to the underlying matter” (Dweck Law Firm v Mann, 283 AD2d 292, 293 [2001]; see Schiller v Bender, Burrows & Rosenthal, LLP, 116 AD3d 756, 758 [2014]; Tortura v Sullivan Papain Block McGrath & Canavo, P.C., 21 AD3d 1082, 1083 [2005], lv denied 6 NY3d 701 [2005]), i.e., an earlier — and successful — award of partial summary judgment on the issue of liability. This plaintiff failed to do. Noticeably absent from both plaintiff’s complaint and the bills of particulars submitted in opposition to defendants’ motion to dismiss are any factual allegations to support plaintiff’s claim that defendants’ failure to file a motion for partial summary judgment on his behalf prior to December 2009 constituted legal malpractice. Specifically, plaintiff failed to delineate, among other things, the general course and defendants’ overall management of the personal injury action, including when discovery was undertaken and/or completed or whether there were ongoing settlement discussions prior to the filing of the underlying motion. Rather, plaintiff simply alleged — in an entirely conclusory fashion — that “the [subject] motion could have been made at any time once issue was joined” in April 2003. While this theoretically is true (see CPLR 3212 [a]), absent detailed factual allegations documenting the efforts undertaken by defendants over the course of the ensuing six years and the manner in which the litigation progressed, plaintiff simply cannot establish that, had the motion for partial summary judgment been brought prior to December 2009, it would have been successful (compare Fielding v Kupferman, 65 AD3d 437, 441-442 2009]). This absence of proof is fatal to plaintiff’s malpractice claim and, therefore, Supreme Court properly granted defendants’ motion to dismiss upon this ground.”

Summary Judgment Reversed, Attorneys Still In The Case

Posted in Legal Malpractice News

The Second Department rarely reverses Supreme Court’s grant of Summary Judgment to the attorneys in a legal malpractice case, but Smith v Kaplan Belsky Ross Bartell, LLP  2015 NY Slip Op 02108  Decided on March 18, 2015  Appellate Division, Second Department is one example.

“The plaintiffs were former executives of Odyssey Pictures Corporation (hereinafter Odyssey) and members of its Board of Directors. Upon their departure from Odyssey, the plaintiffs were given an agreement pursuant to which Odyssey promised to indemnify them in future litigation arising out of their tenure with Odyssey. At some point thereafter, the plaintiffs were sued for actions arising during their tenure with Odyssey. The plaintiffs allegedly evaluated their likelihood of being indemnified by Odyssey and based their litigation strategy in that action upon their belief that they would be indemnified by Odyssey for their litigation costs. At the end of the litigation against them, the plaintiffs sought approximately $455,000 in indemnification from Odyssey, at which time the plaintiffs learned that Odyssey did not have the assets portrayed in the financial reports prepared by Odyssey’s accountants, Want & Ender. In or about February 2004, the plaintiffs retained the defendants to prosecute an action against Want & Ender, and in or about April and June 2004, Want & Ender was served with a summons and notice. Want & Ender failed to answer or appear. However, the defendants did not move for a default judgment in the plaintiffs’ favor and against Want & Ender within a year of that default and, instead, moved for that relief about three years later. The plaintiffs’ action against Want & Ender was ultimately dismissed as abandoned.

The plaintiffs then commenced this action against the defendants, seeking, inter alia, to recover damages for legal malpractice. The defendants moved for summary judgment dismissing the complaint. The Supreme Court granted the motion, and the plaintiffs appeal.

We reject the plaintiffs’ contention that the Supreme Court erred in considering the defendants’ motion for summary judgment on the merits. Although the defendants failed to annex their answer to their initial moving papers, the problem was rectified when an answer was annexed to the reply affirmation of their counsel (see CPLR 2001; Avalon Gardens Rehabilitation & Health Care Ctr., LLC v Morsello, 97 AD3d 611). The plaintiffs suffered no prejudice, since the Supreme Court considered the plaintiffs’ surreply.

The defendants failed to establish their prima facie entitlement to judgment as a matter of law dismissing the cause of action alleging legal malpractice (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853). While the defendants argue that the plaintiffs could not have recovered on their action against Want & Ender because the plaintiffs were not in privity or near privity with Want & Ender (see Health Acquisition Corp. v Program Risk Mgt., Inc., 105 AD3d 1001, 1003; Barrett v Freifeld, 64 AD3d 736, 738), their submissions failed to eliminate all triable issues of fact with respect to this issue (cf. Security Pac. Bus. Credit v Peat Marwick Main & Co., 79 NY2d 695, 702). In support of their motion, the defendants submitted, inter alia, the deposition testimony of the plaintiffs, who testified as to when and how they relied on the improperly prepared financial reports, and explained why they believed that the accountants knew or should have known that the plaintiffs would be relying on the prepared financial reports. Since the defendants failed to establish their prima facie entitlement to judgment as a matter of law dismissing the cause of action alleging legal malpractice, that branch of the defendants’ motion should have been denied, regardless of the sufficiency of the papers submitted in opposition (see Winegrad v New York Univ. Med. Ctr., 64 NY2d at 853; Delollis v Margolin, Winer & Evens, LLP, 121 AD3d 830).”

 

The Appellate Division Sees It Very Differently Than Does Supreme Court

Posted in Uncategorized

Client hires attorney to make sure that a large loan is handled correctly and that the loan transaction would be legal, valid, binding, and enforceable.  The loan became noncollectable. When the motions for summary judgment were filed, Supreme Court granted summary judgment to Plaintiff and denied summary judgment to defendants.  The Appellate Division disagreed.

Quantum Corporate Funding, Ltd. v Ellis  2015 NY Slip Op 02104  Decided on March 18, 2015 Appellate Division, Second Department is a prime example of the legal malpractice battlefield.  It almost always takes place over the “but for” proofs.

“The plaintiff, Quantum Corporate Funding, Ltd., commenced this action against the defendants, Richard I. Ellis and Cassin & Cassin, LLP (hereinafter Cassin), to recover damages for, among other things, legal malpractice. The complaint alleged that the defendants represented the plaintiff in connection with a loan transaction and that, due to the defendants’ malpractice, the note that was given in exchange for the loan was rendered partially uncollectible.

Specifically, the complaint alleged that, in January 2007, nonparty Mardi Gras Celebrations, Inc. (hereinafter Mardi Gras), executed a promissory note in the principal sum of $505,000 in favor of nonparty TCRM Commercial Corp. (hereinafter TCRM), and that the note was contemporaneously assigned from TCRM to the plaintiff. The complaint further alleged that the note was to be secured by the joint personal guaranty (hereinafter the guaranty) of the nonparties Valerie Birkart (hereinafter Valerie) and Nina Birkart (hereinafter Nina). As a condition of the loan, Valerie and Nina were required to give a blanket mortgage on their respective real properties, which were both located in Sanibel, Florida. These mortgages were intended to secure both the note and the guaranty. Although Valerie’s property was allegedly encumbered by a senior mortgage in the amount of $910,000, Nina’s property was allegedly “free and clear of any liens.” In addition, the complaint alleged that all shares of Mardi Gras were pledged to secure the guaranty, and that Mardi Gras would provide a senior security interest in all of its personal property assets.

The complaint alleged that, in November 2007, Mardi Gras defaulted on its obligations under the loan, and that both Valerie and Nina failed to comply with the terms of the guaranty and the mortgages despite due demand. In April 2008, Nina disaffirmed any liability on the ground that she had been less than 18 years old at the time she had signed the guaranty and, thus, lacked legal capacity to be bound by it. The complaint further alleged that, due to certain language in the deeds that had conveyed the real properties to Valerie and Nina, the titles to those properties were not marketable. Furthermore, the UCC financing statements perfecting the security interest in Mardi Gras’s assets were not recorded, and the plaintiff never received the shares of stock of Mardi Gras that had been pledged to secure the note.

The complaint alleged that Ellis and Cassin had been retained to ensure that the loan transaction would be legal, valid, binding, and enforceable against Mardi Gras, Valerie, and Nina. The complaint further alleged that Ellis and Cassin were retained to ensure that the mortgages were enforceable and that the title to the real properties was marketable.

The complaint alleged 11 causes of action against Ellis and 6 causes of action against Cassin, sounding in legal malpractice and breach of contract. The defendants separately moved for summary judgment dismissing the complaint insofar as asserted against each of them. In support of the motions, the defendants argued that they had no duty to inquire into Nina’s age, and were permitted to assume her legal capacity to execute the guaranty. The defendants also asserted that the legal malpractice causes of action should be summarily dismissed because the plaintiff had already recovered an amount in excess of its damages pursuant to a settlement agreement reached with nonparties to this action.”

“Here, the plaintiff failed to establish, prima facie, its entitlement to judgment as a matter of law on the first cause of action, which was asserted against Cassin, or on the second cause of action, which was asserted against Ellis. The plaintiff failed to demonstrate the amount it could or would have collected if the note, the guaranty, and mortgage had been enforceable against Nina (see Jedlicka v Field,14 AD3d 596, 597; Evangelista v Slatt, 295 AD2d 156, 156; McKenna v Forsyth & Forsyth, 280 AD2d 79, 82-83; accord Kay v Bricker, 485 So 2d 486, 487 [Fla 3d DCA]; Freeman v Rubin, 318 So 2d 540, 543 [Fla 3d DCA]). In addition, the plaintiff failed to demonstrate that it was unable to recover the amounts due under the note by other legal means available to it under the terms of the note and guaranty, or that it was unable to obtain equitable relief from Nina even after she disaffirmed liability on the ground of legal incapacity (see Restatement [Second] of Contracts § 14, Comments b, c; see also Restatement of Restitution § 139). Since the plaintiff failed to demonstrate the extent to which it would have been unable to enforce the note and the guaranty after it was disavowed by Nina, and the precise extent to which it would have been able to recover had the note, the guaranty, and the mortgage been enforceable against her, the plaintiff failed to establish, prima facie, that any negligence on the part of Cassin or Ellis was a proximate cause of actual and ascertainable damages (see Bells v Foster, 83 AD3d 876, 877; Snolis v Clare, 81 AD3d 923, 925; cf. Parklex Assoc. v Flemming Zulack Williamson Zauderer, LLP, 118 AD3d 968, 970). [*4]Accordingly, the Supreme Court should have denied those branches of the plaintiff’s cross motion which were for summary judgment on the issue of liability on the first cause of action, which was asserted against Cassin, and on the second cause of action, which was asserted against Ellis.

The Supreme Court properly denied those branches of the defendants’ separate motions which were for summary judgment dismissing various causes of action that were asserted against each of them. “To succeed on a motion for summary judgment, a defendant in a legal malpractice action must establish that the plaintiff is unable to prove at least one” of the essential elements of a legal malpractice cause of action (Parklex Assoc. v Flemming Zulack Williamson Zauderer, LLP, 118 AD3d at 970). It is a defendant’s burden, when it is the party moving for summary judgment, to demonstrate affirmatively the merits of a defense, which cannot be sustained by pointing out gaps in the plaintiff’s proof (see Kempf v Magida, 116 AD3d 736, 736-737; Alizio v Feldman, 82 AD3d 804, 804).

Contrary to Cassin’s contention, it was not entitled to summary judgment dismissing the first cause of action, notwithstanding its contention that it owed no duty to verify that Nina had the legal capacity to execute the guaranty. Cassin’s submissions included evidence that showed that, consistent with the allegations in the complaint, Cassin was retained to ensure that the loan transaction was legal, valid, binding, and enforceable. Accordingly, Cassin failed to eliminate all triable issues of fact as to the scope of its representation of the plaintiff and its concomitant duty in the underlying transaction (see Marshel v Hochberg, 37 AD3d 559, 559-560; see also Shaya B. Pac., LLC v Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, 38 AD3d 34, 39; cf. AmBase Corp. v Davis Polk & Wardwell, 8 NY3d 428, 429).

Contrary to both of the defendants’ contentions, they were not entitled to summary judgment dismissing the legal malpractice causes of action. The defendants failed to establish that the plaintiff recovered in excess of its actual and ascertainable damages by virtue of the settlement agreement it reached with certain of the nonparties that were involved in the underlying loan transaction. In addition, there is no merit to the defendants’ contention that the actual amount that was loaned by the plaintiff was $444,400.03, and that $60,599.97 of the principal loan amount was withheld pursuant to an interest reserve agreement.”

Fraud or Just A Big Mistake?

Posted in Uncategorized

Fidelity Natl. Tit. Ins. Co. v Smith Buss & Jacobs, LLP  2015 NY Slip Op 02058  Decided on March 17, 2015
Appellate Division, First Department brings us the question of whether the law firm aided and abetted fraud, was negligent or simply made a big mistake.  The Appellate Division left that question open on a motion to dismiss.

“The complaint alleges that the sponsor of 16 apartment units in a condominium development, Empire Builders of New York Corp., and other parties defrauded the purchasers of the units by falsely representing that part of the purchase price would be used to satisfy portions of a blanket mortgage allocated proportionally to the units and by diverting the funds meant to satisfy the mortgage for their own use. Empire also allegedly failed to disclose that six of the units were encumbered by mortgages held by Al Perna. Plaintiff defended the purchaser’s title and mortgagee Wells Fargo Bank’s mortgage loan against foreclosures of the mortgages, pursuant to title insurance policies that its policy-issuing agent, Imagine Title, had allegedly fraudulently issued on its behalf. Proceeding individually and as subrogee of the purchasers and Wells Fargo, plaintiff asserts claims for fraud, aiding and abetting fraud, aiding and abetting conversion, and breach of fiduciary duty against Empire’s attorney, defendant Smith Buss & Jacobs, LLP (SBJ) and a breach of contract claim against defendant Blomberg for breaching instructions that Wells Fargo had given him by failing to ensure that all liens of record were satisfied before disbursing Wells Fargo’s funds from escrow.

The complaint alleges that SBJ misrepresented that the subject units would not be encumbered by the mortgages in the offering plan and closing statements it drafted and that it deviated from normal practice by failing to obtain the necessary payoff letters from New York Community Bank (NYCB), which had been assigned the mortgages, before preparing the closing statements (which typically set forth the payoff amounts) and by directing the purchasers to pay a party named Michael Lease, instead of NYCB. These allegations raise a reasonable inference of fraudulent intent on SBJ’s part and justifiable reliance by the purchasers, and therefore state a claim for fraud against SBJ (see Eurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d 553, 559 [2009]).

The allegations of SBJ’s involvement are sufficient to establish its actual knowledge of the fraud scheme, as well as its substantial assistance therein, and thus state an aiding and abetting fraud claim (see Oster v Kirschner, 77 AD3d 51, 55-56 [1st Dept 2010]). These allegations also state a claim for aiding and abetting Imagine’s breach of fiduciary duty to Fidelity (see Kaufman v Cohen, 307 AD2d 113, 125-126 [1st Dept 2003]). In addition, they state a claim for aiding and abetting the conversion of funds by Empire and Imagine (see Weisman, Celler, Spett & Modlin v Chadbourne & Parke, 253 AD2d 721 [1st Dept 1998]).”

How Much Do You Have To Do To Violate Judiciary Law 487?

Posted in Legal Malpractice News

Judiciary Law 487 is the attorney deceit law from Olde England.  It allows for treble damages against an attorney who attempts or succeeds at deceit towards the Court or a party in litigation.  How bad do you have to be to violate the statute?

Savitt v Greenberg Traurig, LLP  2015 NY Slip Op 02003    Decided on March 12, 2015  Appellate Division, First Department is an example of not enough.

“Order, Supreme Court, New York County (Charles E. Ramos, J.), entered June 28, 2013, which, to the extent appealed from, as limited by the briefs, granted defendants’ motions to dismiss the Judiciary Law § 487 claims against defendant law firm and the individual attorney defendants, and the derivative claims against defendants Janis Savitt (Janis) and Designs by Janis Savitt, Inc. (Designs), unanimously modified, on the law, the motion to dismiss the derivative claims denied, and otherwise affirmed, without costs.

The motion court properly dismissed the Judiciary Law § 487 claims since the complaint “fails to show either a deceit that reaches the level of egregious conduct or a chronic and extreme pattern of behavior on the part of” the defendant attorneys (see Wailes v Tel Networks USA, LLC, 116 AD3d 625, 625-626 [1st Dept 2014]; Herschman v Kern, Augustine, Conroy & Schoppman, 113 AD3d 520 [1st Dept 2014]). The complaint alleges only bare legal conclusions that the defendant attorneys, who jointly represented plaintiffs and defendants Janis and Designs in a prior lawsuit, acted with the requisite intent to deceive. Specifically, there are no factual allegations from which to infer that the attorneys knew that their advice to plaintiffs that there were no meritorious claims they could have asserted against Janis and Designs in the prior lawsuit, was false, and thus, that they knowingly and intentionally misled plaintiffs into releasing Janis and Designs from all claims in the course of settling that lawsuit (Callaghan v Goldsweig, 7 AD3d 361, 362 [1st Dept 2004]).”

When Are Hands Unclean Enough in a Legal Malpractice Case?

Posted in Legal Malpractice News

Pari Delicto or unclean hands is a principal that the courts should not decide between wrongdoers.  When may the court use this principal to wipe the board clean and allow no-one to bring a legal malpractice or a judiciary law 487 claim?

In Savitt v Greenberg Traurig, LLP  2015 NY Slip Op 02003  Decided on March 12, 2015  Appellate Division, First Department  we see Supreme Court dismissing the claims, and the Appellate Division reversing.  For the AD, there was not enough wrongdoing.

“Order, Supreme Court, New York County (Charles E. Ramos, J.), entered June 28, 2013, which, to the extent appealed from, as limited by the briefs, granted defendants’ motions to dismiss the Judiciary Law § 487 claims against defendant law firm and the individual attorney defendants, and the derivative claims against defendants Janis Savitt (Janis) and Designs by Janis Savitt, Inc. (Designs), unanimously modified, on the law, the motion to dismiss the derivative claims denied, and otherwise affirmed, without costs.”

“The motion court erred, however, in dismissing the derivative claims asserted by plaintiff Michelle Savitt on behalf of M+J Savitt, Inc. (M+J), against Janis and Designs on the basis of unclean hands (see Ross v Moyer, 286 AD2d 610, 611 [1st Dept 2001]). Michelle and Janis allege corporate misdeeds against each other. However, there are issues of fact as to whether Michelle committed misconduct and, if so, whether Janis’s misconduct far exceeded that of [*2]Michelle. There are also questions of fact as to whether Janis was aware of and consented to Michelle’s conduct (Dillon v Dean, 158 AD2d 579, 580 [2d Dept 1990]; Stahl v Chemical Bank, 237 AD2d 231, 232 [1st Dept 1997]).”

 

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