New York Attorney Malpractice Blog

The relationship between a motion to dismiss [CPLR 3211]. a request to amend the pleadings, and dismissal on the merits is wrought with both emotion yet is based upon logic.  No author of pleadings appreciates a motion to dismiss.  The motion generally brays that there is "no merit", the pleading is "frivolous", is badly written, etc.

Yet, the rule of logic generally prevails.  A pleading in legal malpractice  must adequately plead that the defendants "failed to exercise that degree of care, still, and diligence commonly possessed by a member of the legal community," and that their negligence was "a proximate cause of damages" (DeNatale v Santagelo, 65 AD3d 1006, 1007), and,is sufficient to state a cause of action to recover damages for legal malpractice.

"[M]otions for leave to amend pleadings should be freely granted, absent prejudice or surprise directly resulting from the delay in seeking leave, unless the proposed amendment is palpably insufficient or patently devoid of merit" (Aurora Loan Servs., LLC v Thomas, 70 AD3d 986, 987; see CPLR 3025[b]; Tyson v Tower Ins. Co. of N.Y., 68 AD3d 977, 979; Peerless Ins. Co. v Micro Fibertek, Inc., 67 AD3d 978, 979-980).

And so it went in Feldman v Finkelstein & Partners, LLP ,2010 NY Slip Op 06517 ,Decided on August 31, 2010 , Appellate Division, Second Department , a legal malpractice case.  "Contrary to the defendants' contention, there is no indication that the Supreme Court considered evidentiary submissions and, thus, the issue to be determined at this stage is not whether the plaintiffs have a cause of action, but only whether they have stated one (see Guggenheimer v Ginzburg, 43 NY2d 268, 275; Sokol v Leader, 74 AD3d at 1181-1182). Accordingly, the Supreme Court improperly granted that branch of the defendants' motion which was to dismiss the first cause of action. "
 

TJS of N.Y. Inc. v. Koppelman, 2010 NY Slip Op 32329(U), by Justice Denise F. Molia of Supreme Court, Suffolk County is something of a cliff-hanger.  When we read it, there was no foreshadowing, no pre-tensioning nor any insight into how the decision would come out.  it's a classic didhedoit.

Plaintiff claims a longstanding relationship with attorney defendant.  The two of them and others seem to have been in and out of business in the vending and bar areas.  In this case, plaintiff eventually bought a bar, and assumed what he thought was going to be debts of $ 40,000 or so.  it turned into $1 million.  Question:  was the defendant his attorney or not?

In the end, this summary judgment decision went against defendant, and the motion was denied.  Plaintiff's affidavit seems to be the turning point, especially when it was dotted with several troubling deposition answers by defendant and a few inconvenient facts.

Plaintiff said that he used defendant as an attorney several times over the years, building up a relationship.  Defendant says no, but testified that he may have undertaken an incorporation in which plaintiff was a shareholder.  Plaintiff says that he paid defendant in cash, and defendant says that when he wrote the bar contact that plaintiff may have had some input into the terms.

Plaintiff says that defendant represented him in the transaction, but defendant says that one Navaretta was plaintiff's attorney.  Inconveniently, defendant sent the contract of sale directly to plaintiff, bypassing the "attorney."  An so it goes, with "facts" that cannot be conclusively found.

In the end, motion for summary judgment denied.

We grant that it is a stretch to jump from new statutes to legal malpractice, but it is a given that when the rules change, there will be mistakes made.  Mistakes, the eternal produce of human endeavor is known as legal malpractice within the legal community. 

It is no novelty, nor a surprise that negligent handling of discovery might lead to dismissals and sanctions.  U.S. Judge Shira Scheindlin's decisions in Zubulake v. UBS Warburg  and Pension Committee are considered groundbreaking, yet merely restate and interpret the existing law. 

Parties in litigation are required to save and exchange electronically stored information.  No clearer message could be stated in the twin decisions.  Now, the State of New York has adopted a set of regulations which are calculated to streamline the discovery proceedings.

Preliminary conferences now must include a complete discussion of ESI, and provisions must be made to preserve and  exchange ESI.  Failures by attorneys to issue "litigation holds" and to preserve ESI will inevitably lead to problems, sanctions and dismissals.  Legal malpractice litigation will follow, as surely as day follows night.

Legal representation in even simple matters can lead to unintended consequences. As an ExampleH & J Restaurant v, A & J Grand Enterprises and Leigh, 2009 Slip OP 31544, authored by Justice Edmead, demonstrates how a simple ministerial mistake can end up with a potential $ 400,000 loss, with later judgment against the attorney.

It's a simple transaction, A buys a restaurant from B. As might be expected, Seller exaggerates the sales, or hides underpayment of taxes. Since these commercial transactions have taken place since time immemorial, there are safeguards and protections. Buyer can take the business free of personal liability if it notifies the tax authorities 10 days prior to the sale, in which case the tax authorities have 5 days to assert tax liability. Should it happen, buyer can then back out.

Here, the notification was not made within 10 days, and several months later the tax authorities asserted personal liability to buyer in the neighborhood of $ 400,000. Seller is in default, and no where to be found.

What is the lesson here? Lesson 1: Legal malpractice is everywhere lawyers represent clients. Lesson 2: Know the subject matter of your area of law and don't make simple transactions difficult. Lesson 3: Review lesson 2.
 

It's not exactly legal malpractice and its not New York, but the headline and back story of this $ 1.96 Million sanction to Paul, Weiss, Rifkind, Wharton & Garrison and Lowenstein Sandler shocks the eye.  Celebrity sues celebrity over an oral agreement to make a bequest.  This case ends in a finding of frivolity and the largest sanction we remember seeing.  Here is the story from Law.Com:

 "Bergen County, N.J., Superior Court Judge Ellen Koblitz doesn't seem too worried about sparing the reputations of Paul, Weiss, Rifkind, Wharton & Garrison and Lowenstein Sandler. In June, you'll recall, she found that the two firms had filed a frivolous suit on behalf of billionaire Ronald Perelman in a family dispute over hundreds of millions of dollars. On Friday she issued a final opinion , rejecting the firms' arguments for mercy and ordering them to pay $1.96 million in legal fees to the defendants, Perelman's former father-in-law and brother-in-law.

Patent Litigators held their breath all through the summer, as the Supreme Court considered whether a patent could be enforced in the Internet process area.  Bilski v. Kapos was decided by terms end, but did not really put the issues to bed. 

Apparently, while others were holding their breath, this plaintiff/client and her attorney were starting their own litigation cycle.  As Law.Com reports dueling suits in Westchester and New York bring up the question of whether the attorneys abused plaintiff in their billing while representing her in patent litigation.

"A retired university professor who has pursued dozens of electronics companies for patent infringement on Monday filed a notice to sue her former attorneys for $10 million, accusing them of misusing escrow funds and charging her excessive fees.

Gertrude Neumark Rothschild filed a summons in Manhattan Supreme Court against Troutman Sanders; an intellectual property boutique chaired by Albert L. Jacobs Jr. before he became a partner at Troutman; and Jacobs.

Her motion comes only days after Troutman, Jacobs and the now-defunct boutique filed separate lawsuits against her in Westchester County Supreme Court for a combined $4.4 million in unpaid legal bills. Rothschild said in her court papers that she fired Troutman Sanders for cause in June.

Jacobs began representing Rothschild, a former Columbia physics professor, in October 2007 after arriving a few months earlier at Dreier from Greenberg Traurig, according to his boutique's complaint. Rothschild retained him to represent her before the International Trade Commission in cases against companies importing devices using light-emitting diodes that she claimed infringed on patents she held.

Rothschild turned to Jacobs for later disputes both in the United States and abroad, his complaint said. Among those Jacobs targeted for Rothschild were Sony Corporation, Motorola Inc. and Hitachi Ltd. and 31 other companies, according to records filed in February 2008 before the U.S. International Trade Commission.

By November 2009, when Jacobs formally became a partner at Troutman Sanders, he had obtained $14 million in settlements and licensing fees for Rothschild, according to the boutique's complaint, which said settlements and agreements came from 10 large consumer electronic companies.

Rothschild paid Albert Jacobs LLP on some of its invoices, "but has failed and refused" to pay other ones, the boutique said in its complaint. She "never expressed any dissatisfaction with the legal services" the boutique rendered, the suit claimed, but instead "commended" its efforts. "

Sanna v Polizzotto ;2010 NY Slip Op 51496(U) ;Decided on August 23, 2010 ;Supreme Court, Richmond County ;Minardo, J.  discusses several interesting aspects of legal representation, contingent fees, what is unconscionable in contingencies, and legal malpractice.
 

Plaintiffs and their family were in a dispute over property.  Attorneys were retained to represent one of the feuding sides, and successfully concluded the case with a cooperative effort to sell the property and divide the proceeds.  All good, so far.  The rub occurs when fees come into play.  Attorneys:  we offered to do this on an hourly basis.  Client could not pay, so we went to a contingency.  Client:  25% is way too much!

In this decision, the court considered:  how large may a contingency be and what must plaintiff do when they enter into a contingent fee arrangement with the attorneys? 

"According to the retainer agreement, plaintiffs had agreed to pay defendants as consideration for their legal services "twenty-five (25%) of the property or sum recovered, whether recovered by suit, settlement or otherwise" (see Defendants' Exhibit "E", emphasis supplied).

On the basis of these facts, plaintiffs commenced this action against the defendants on or about April 22, 2008 asserting causes of action for conversion, breach of contract, fraud, breach of fiduciary duty and punitive damages, each arising out of their retainer agreement with defendants and the amount of the legal fees payable thereunder "
 

"Attorney-client fee agreements are a matter of special concern to the courts and, while enforceable, are affected by "lofty principles" different from those applicable to commonplace commercial contracts (Law Off of Howard M. File, Esq., PC v. Ostashko, 60 AD3d 643, 644 [2nd Dept 2009] quoting Matter of Cooperman, 83 NY2d 465, 472 [1994]; Malamut v. Doris L. Sassower, PC, 171 AD2d 780 [2nd Dept 1991]). "

"Contingent fee agreements between attorneys and their clients generally operate to allow a client without sufficient financial means to obtain access to the justice system (see Law Office of Howard M. File, Esq., PC v. Ostashko, 60 AD3d at 644). However, for attorneys entering into such arrangements, there is always the risk that their time and resources will be expended in the pursuit of legal endeavors that may ultimately prove fruitless (see King v. Fox, 7 NY3d 181, 192 [2006]). In addition, it is well settled that while the attorney is obligated to comply with the terms of the agreement, the client may unilaterally terminate the contingent fee arrangement at any time, leaving the lawyer with no cause of action for breach of contract and a recovery limited to quantum meruit (id.). Case law also provides that circumstances arising after contract formation can render a contingent fee agreement unenforceable, even though it was not unconscionable [*3]when entered into, e.g., where the agreed percentage of the recovery allocated to legal fees is deemed disproportionate to the value of the services rendered (see Lawrence v. Miller, 11 NY3d 588 [2008]). In this regard, it is not only the agreed-upon percentage of the recovery that can render a contingent fee agreement unconscionable."

"Assuming arguendo that the defendants have demonstrated prima facie that (1) the legal services which they performed on the plaintiffs' behalf were rendered in good faith; (2) plaintiffs knowingly accepted those services; and (3) they were fully informed of the terms of the contingency, plaintiffs' present assertion that they did not fully understand its terms is insufficient to generate a triable issue. There is no evidence to indicate the plaintiffs are under some type of disability which would prevent them from understanding a one (1) page retainer agreement which clearly and unambiguously indicated it was a 25% contingency agreement whether recovered in suit, settlement or otherwise."

In Brackman v Medical Liab. Mut. Ins. Co. ; 2010 NY Slip Op 51432(U); Supreme Court, Nassau County , Winslow, J. we see an unusual but doctrinaire situation in which a doctor sues his defense attorneys for settling a case in which he was sued.  The decision lays bare the method by which medical malpractice insurers settle cases.  if the carrier wants to settle and the doctor does not [and there is a consent provision in the policy], then the parties engage in binding arbitration over whether to settle the case with plaintiff or not. 
 

In two different actions, Brackman was sued for medical malpractice.  MLM wanted to settle both; he did not want to settle either.  After an arbitration in one, that case was settled.  An arbitration is scheduled, or has been held, in the other.

"Although the pro se complaint is not a model of clarity, Brackman alleges in relevant part that MLM: (1) breached the policy since it allegedly had no right to compromise either the Jones or the Diresta malpractice claims without his unconditional consent; (2) that the Angel defendants committed legal malpractice and breached their fiduciary duty in the Jones action; and (3) both MLM and the Angel defendants conspired together to bully, coerce and pressure Brackman into accepting the proposed settlement over his objection in the Jones case (Cmplt., ¶¶ 37-38, 45-48). There is no allegation made, to the effect that the Jones arbitration proceeding was corrupt and/or that the decision reached by the medical advisor was made in bad faith. "

"With respect to damages, the plaintiff maintains that by virtue of defendants' wrongful conduct and MLM's cancellation of his malpractice coverage, he was forced to close his New York practice. Moreover, he lost income and sustained emotional distress since he was unemployed for some six months and could not secure "traditional" medical malpractice insurance — although he eventually secured a license and surgery privileges in, inter alia, Florida (Cmplt., ¶¶ 15, 17-18, 32).

"It is settled that malpractice claims grounded upon contingent or hypothetically projected injuries are generally insufficient to establish liability (Bauza v. Livington, supra; Brooks v. Lewin, supra, at 734-735; Pellegrino v. File, 291 AD2d 60, 63). Indeed, while the plaintiff alleges, inter alia, that the Angel defendants' conduct was coercive and that he was damaged thereby, the plaintiff's pleaded factual claim is that, in fact, he never succumbed to any alleged pressure or coercion(Cmplt., ¶¶ 37, 45-48). Rather, he alleges that he refused to consent and that his injuries flowed from MLM's decision to refer the matter to a medical [*8]advisor over his express objection.

Nor does the complaint contain anything other than vague factual allegations supporting the theory that the delays supposedly generated by the Angel defendants were causally related to, or facilitated, MLM's subsequent decision to refer the Jones dispute to a settlement medical advisor (e.g., Cmplt., ¶¶ 15, 34). "

Bankruptcy and legal malpractice have a special relationship.  There are special rules, there are collateral estoppel dimensions to fee requests, and the mere filing of bankruptcy may end a plaintiff's right to a cause of action.  Here, in GREENSTREET FINANCIAL, L.P., against- GREENSTREET FINANCIAL, L.P.,  UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; 2010 U.S. Dist. LEXIS 84827 we see  the principal that all elements of a legal malpractice case, incliuding damages must be in place before the case is ripe.

"In the instant case, "actual damages" have not been determined, since judgment has not been entered against Smul and the Smul Trust in this action, and, according to the fourth-party defendants, litigation is also pending in Florida, that might affect the amount, if any, for which Smul is liable to the plaintiff and/or the third-party plaintiffs. Therefore, to the extent the fourth-party defendants move for summary judgment, their motion must be denied, without prejudice, as premature, since the issue of "actual damages" has not yet been determined. See id. at 214 (finding that adjudication of a legal malpractice claim was "premature" when the plaintiff could not "establish actual damages absent a final judgment or resolution in the still pending controversy"). As a result, the fourth-party defendants' request, that the claims [*7] made against them in the Fourth-Party complaint be stayed, pending resolution of the claims against Smul and the Smul Trust, is granted. See id (noting that "a legal malpractice claim may not be asserted until the matter on which the claim is based has been concluded," and determining that the legal malpractice claim would be tried after a verdict was rendered, if still appropriate). The motion to sever is denied, as moot."

It being a Friday in the Summer, we bring you legal malpractice news from the Jersey Shore, by way of Law.Com.  Legal malpractice issues arise wherever attorneys represent clients.  Clients sometimes bear some portion of the blame when cases/transactions go sour.  Here is a description of one, from Law.Com.

Charles Toutant writes: "Warning clients of their own duty to read critical documents, a New Jersey appeals court held Wednesday that a malpractice suit over Sills, Cummis & Gross' drafting of a bank-merger agreement was time-barred and meritless.

The panel found in Sullivan v. Sills, Cummis, Zuckerman, Radin, Tischman, Epstein & Gross, A-4805-07, that the plaintiffs were experienced in the world of banking and failed to follow their lawyers' advice to look over the agreement.

At issue was the suit by four directors of the former West Jersey Community Bank in Fairfield, N.J., who claimed they were shortchanged when Sovereign Bank of Wyomissing, Pa., bought their institution in 1995. They said their lawyers failed to incorporate into the merger agreement Sovereign's oral promises to form a post-merger advisory board and, as a result, the plaintiffs lost out on stock options and fees they would have received from serving on the board.

The bank retained Sills Cummis in 1995 to represent it in the Sovereign negotiations. Soon after, the law firm instructed the plaintiffs and other board members in a letter that their duty of care included "carefully reviewing all documents and other items presented" and that "blind reliance on the opinions of legal or financial advisors without independent fact gathering or decision-making" was "viewed unfavorably by courts."

The merger agreement was approved on Sept. 29, 1995. It called for formation of the advisory board and for members of that board to receive stock options if the bank were to adopt a stock option plan for its main board of directors.

But Sovereign never formed the advisory board, and when it created a stock options plan for its board of directors in 1997, it never gave that benefit to the plaintiffs -- John Sullivan, Peter Stewart, Raymond Durkin and Leonard Schneider.

In December 1999, the plaintiffs and two other former West Jersey directors sought to enforce the oral promises in a suit against Sovereign in federal court in Newark. Sovereign moved for dismissal for failure to state a claim on which relief could be granted, and the case was dismissed in January 2001.

The plaintiffs then filed their malpractice suit against Sills Cummis and lawyers Steven Gross, Frederick Tudor and Victor Boyajian on Jan. 21, 2003. Hudson County Superior Court Judge Maurice Gallipoli granted summary judgment to the defendants, finding the suit time-barred and meritless."