Sue One Firm, Arbitrate With The Other

in a huge note-issuance transaction, Stonebridge Capital LLC hires Brown Rudnick LLP to prepare the documents.  The attorney handling the case moves from BR to Stroock & Stroock & Lavan LLP and, of course, the transaction goes sour.  The wrinkle here is that BR and a typical retainer agreement with plaintiff while SS&L had an arbitration clause in theirs.

How to proceed?  In Stonebridge Capital, LLC v Brown Rudnick LLP  2014 NY Slip Op 32174(U)
August 12, 2014  Sup Ct, NY County  Docket Number: 152259/2012  Judge Eileen A. Rakower decided to allow the Plaintiff to arbitrate with SS&L first, and then if necessary, litigate with BR.

Brown Rudnick's third-party complaint alleges that that Brown Rudnick "continuously represented" Plaintiff through the Transaction's closing, and that,  "when [Plaintiff] retained [Brown Rudick] to provide legal services in connection  with the Transaction, attorney Boris Ziser ("Ziser"), then a partner of [Brown  Rudnick], was responsible for providing those services to Plaintiff." Brown
Rudnick's third-party complaint further alleges that, on or about June 4, 2007, Ziser left Brown Rudnick to join Stroock, as a partner. The third-party complaint alleges that, Ziser, in his capacity as a partner for Stroock, also continued to represent Plaintiff in the Transaction, from the time Ziser joined Stroock through the Transaction's closing, that Ziser, in his capacity as a partner for Stroock, actively participated in the negotiation and drafting of the final versions of documents for the
Transaction. Brown Rudnick claims that Stroock had an attorney-client relationship with Plaintiff, that Plaintiff executed the final documents for the Transaction on Stroock's advice, and that, as a result, Stroock is responsible for any alleged negligence or malpractice respecting the transaction.

The Statement of Claim alleges that Plaintiff incurred damages, "[a]s a direct and proximate result of the negligence of [Stroock] in connection with the advice, drafting, negotiation, preparation, editing and review of the Transaction documents." CPLR § 2201 provides, "[e]xcept where otherwise prescribed by law, the court in which an action is pending may grant a stay of proceedings in a proper case, upon such terms as may be just."

Here, Brown Rudnick and Stroock do not dispute that both law firms represented Stonebridge in connection with the Transaction, or that the Arbitration relates to the legal advice and services that Plaintiff allegedly received in connection with the Transaction. Although Brown Rudnick is not a signatory to the arbitration agreement between Stroock and Stonebridge, a stay of litigation that includes non-signatories to the subject arbitration agreement may be appropriate where "the
determination of the pending arbitration proceeding may well dispose of or limit the
issues to be determined in this action." (Oxbow Calcining USA Inc. v. American Indus. Partners, 96 A.D.3d 646, 652 [1st Dep't 2012])."

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A Curious Case of Non-Reporting

Hospital and Physician are sued for medical malpractice.  The Med Mal case is as big as they come...a brain damaged baby case.  How it ends up in Civil Court is an interesting story.  In Gonzalez v Flushing Hosp. Med. Ctr.  2014 NY Slip Op 51226(U)  Decided on August 12, 2014
Civil Court Of The City Of New York, Queens County  Buggs, J.the Hospital must have been providing its own insurance, because when it filed Bankruptcy, everything stopped.  The hospital had been defending the Physician, but after the Bankruptcy filing, that ended.  What happened to the Physician?

"On March 3, 1994, Laura Gonzalez gave birth to plaintiff Gonzalez at Flushing Hospital Medical Center ("FHMC"). Due to hypoxia [FN1] which occurred during labor and delivery, plaintiff Gonzalez suffered severe brain damage as well as extensive mental and physical impairments. In June 1995, Gonzalez, by her mother as natural guardian, and both parents individually, filed a medical malpractice case against FHMC alleging negligence in failing to timely respond to signs of fetal distress or to confirm such fetal distress during Laura Gonzalez' labor, and of failing to perform a timely cesarean section which would have prevented the resulting injuries to plaintiff Gonzalez. In August 1996, Gonzalez filed a second malpractice action, this time against Bey, who was the on-call physician at the time of the delivery, and another physician, Jonathan Cha. Both actions were consolidated for joint trial in July 1997.

In August 1996, FHMC retained defendant law firm Breitner & Hoffman, P.C. ("B & H") to defend the action. B & H represented and filed answers on behalf of all defendants, including Bey. However, in June 1998, FHMC filed for Chapter 11 bankruptcy relief in the United States Bankruptcy Court for the Eastern District of New York. The malpractice actions were subsequently stayed pursuant to §362(a) of the United States Bankruptcy Code.In 2000, the law firm of Garbarini & Scher ("G & S") was appointed to represent the bankruptcy Trustee in the mediation of the medical malpractice claims. In 2002, the Court approved a settlement in Gonzalez's case against FHMC and other defendants for two million dollars ($2,000,000); however, Bey was excluded from this settlement because he was deemed to be an independent contractor. The malpractice action against Bey, therefore, continued.

Bey brought this action against FHMC and B & H in 2005. The action was ultimately discontinued as against FHMC, as was a third-party action B & H brought against G & S. The claims against B & H were that it committed legal malpractice in that the firm failed to protect his interests in the Gonzalez lawsuit, particularly in what Bey claimed was its duty to investigate sources of insurance to protect him against a potentially large exposure, and in failing to advise him to notify Medical Liability Mutual Insurance Company ("MLMIC"), his personal medical malpractice insurance carrier. Bey submitted the claim to MLMIC in February 2004, approximately seven and a half years after Gonzalez brought her action against him; the insurance company denied the claim as untimely.

On September 27, 2006, while being represented by another attorney, Bey executed a $1 million confession of judgment in favor of Gonzalez in a "so ordered" stipulation of settlement in Supreme Court, Queens County; in November of the same year, he assigned his rights in the within malpractice action to Gonzalez. After the assignment, B & H filed a motion for summary judgment in 2007 on the theory that "...Bey is no longer a real party in interest as a result of the settlement with Gonzalez, to wit, he has not suffered any pecuniary damages and, thus, cannot establish that B & H proximately caused him to sustain actual damages" (Gonzalez' Affirmation in Opposition, Exhibit E; Geddis Abel Bey v Flushing Hospital Center, and Breitner & Hoffman, P.C., Sup Ct, Queens County, December 7, 2007, Satterfield, J., index No. 23476/2005). The motion was denied. (Exhibit E, supra at 2-3).

Therefore, notwithstanding any duty Gonzalez contends B & H owed to Bey as his attorneys, at the outset, responsibility for notifying the insurance company of any claim or potential claim belonged to Bey, the policyholder. In fact, when Bey finally submitted a claim in 2004, it was [*3]denied for his failure to comply with the policy terms requiring notice to the insurance company of a lawsuit (Gonzalez' Affirmation in Opposition, Exhibit B; Denial letter from MLMIC to Geddis Abel-Bey, M.D., dated May 4, 2004). There is nothing in the language of the policy providing any exception to the notice requirement—not even, as in this case, Bey's belief that he would be represented in all stages of the action by B & H, attorneys retained by FHMC. Bey's duty was not only required by the terms of the policy, but was supported by case law holding that failure to satisfy the timely notice requirement of an insurance policy constitutes valid grounds for denial of a claim. See Security Mut. Ins. Co. of NY v Acker-Fitzsimmons Corp., 31 NY2d 436 (1972); Safer v Government Employees Ins Co., 254 AD2d 344 (2d Dept 1998)

Further, assuming arguendo, that B & H did have such an obligation to Bey and breached it, Gonzalez has also failed to show that such breach was the proximate cause of Bey's damages. "Proximate cause is established by showing that the plaintiff would have succeeded in the underlying action or would not have incurred damages but for the attorney's negligence" (Soliman v O'Connor, McGuiness, Conte, Doyle & Oleson, 118 AD3d 866 [2d Dept 2014] [internal citations omitted]). While Haber posits that B & H's "failure" was a proximate cause of Bey being faced with a large financial exposure in the medical malpractice case, that argument ignores that Bey himself was responsible for notifying his carrier, and further [*4]disregards FHMC's bankruptcy filing as an intervening cause. B & H was not a participant in the Bankruptcy Court proceedings, and the medical malpractice actions for which it had been retained had been stayed. Moreover, the ultimate Bankruptcy Court settlement of the medical malpractice matter as to all parties except Bey—leaving Bey with a large financial exposure—was not a direct or foreseeable consequence of any act or act of omission by B & H. It was in the Bankruptcy Court that Bey was deemed not to be an employee of FHMC, leading to his exclusion from the settlement."

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"I Don't Remember" and Denial of Motion in Legal Malpractice

Immigration legal practice is rife with accusations of neglect, lack of knowledge and incompetence.  INS practice is based almost completely on forms, and knowing when and what to include with the ever-changing forms is the essence of good immigration legal work.  Attorneys often fail their immigration clients by telling them, in essence, "don't worry."

Shayan v O"Malley  2014 NY Slip Op 32144(U)  August 11, 2014  Supreme Court, New York County  Docket Number: 150447/2011  Judge: Ellen M. Coin is an example of what happens when the attorney's deposition consists of "I don't remember."

"This action arises out of defendants' representation of  plaintiff Ali Shay an (Shay an) concerning an immigration matter. Shayan, a native of Iran and citizen of Canada, claims that during
defendants' representation of him from January 2008 until December 4, 2009, defendants failed to advise Shayan of the need to renew his employment authorization document (EAD), and failed to file a proper and timely EAD renewal application, ·which led to the loss of his employment at Moody's Investors Service, Inc. (Moody's) for 11 weeks.   Shayan was born in Iran, and became a citizen of Canada in June 1997. He entered the United States in September 2004 as a visitor. From November 2004 to 2011, he was married to a United States citizen. On or about March 11, 2005, plaintiff retained an immigration attorney in California to change his immigration status from a B-2 visa to a "green card," which is a United States Permanent Resident Card (USCIS Form I-551), based on his marriage. In or around June 2005, Shayan received an EAD from the United
States Citizenship and Immigration Services (USCIS). This EAD expired one year later, in 2006. He moved to New York some time in 2005.

Around the summer of 2008, Castaneda assisted Shayan in learning the status of his EAD application, filed by his California attorney, and in getting fingerprinted in New York City to complete the application. As a consequence, in approximately July 2008, he received the actual EAD card, which was valid from September 17, 2007 through September 16, 2008. When he got the card, he informed Castaneda, who told him she would take care of getting a new card, since this one was about to expire. At a December 2008 meeting between Shayan and O'Malley, the two discussed the status of his EAD as follows: "Now since Diana was gone I asked Mr. O'Malley So I have two issues which Diana was working on for me. One is to postpone the Stokes interview. The second is to get my new EAD. Mr. O'Malley said, 'Don't worry about it. Diana is gone. I will take care of everything'" 1 (Shayan dep tr at 70:15-24). In 2009, when Shayan asked O'Malley about his EAD, O'Malley advised him that "he was not required to renew his EAD, because he had not changed employers and that he was not required to renew his EAD unless he planned to change employers. The defendants took no action to extend [Shayan's] EAD and it expired" (complaint, 'JI 20, Shayan aff, ! 17, Shayan dep tr at 72:8-12).

On or about December 3, 2009, Moody's terminated Shayan' s employment on the ground that his EAD had expired, but agreed to allow Shayan to remain employed pending the outcome of the December 18, 2009 conference. On December 4, 2009, Shayan met with O'Malley to discuss the
potential termination of his employment and the December 18th conference. Shayan alleges that at that meeting, O'Malley advised him that he was not eligible for an EAD "and that he should work
illegally" (id., ! 32). Further, Shayan alleges, O'Malley advised him that defendants had filed an application for an EAD extension, as part of the December 2, 2009 filing, without Shayan's knowledge. Shayan was not satisfied with defendants' responses and terminated
their representation on December 4, 2009.

Klapisch followed up on the EAD application filed by O'Malley, and was able to obtain a new EAD for Shayan on February 1, 2010. Shayan successfully obtained his green card as well. Moody's
reinstated his employment on March 3, 2010.

On their motion, defendants have not successfully argued that there is no question of fact with respect to Shayan' s claim.  First, defendants argue that Shayan is unable to establish the
causation between any failure on defendants' part and Moody's 9 [* 9]termination of Shayan, because Moody's terminated Shayan for lying on his I-9 form. The record, however, does not support this position. The December 21, 2009 email from human resources at Moody's to Susan Hourihan, a Human Resources Generalist at Moody's, indicates the reason for Shayan's termination as "Work Authorization Expired." At her deposition, Hourihan testified that Shayan' s employment was terminated because of his failure to produce proof of a valid work authorization. There is nothing in the record establishing that Moody's terminated Shayan because he
lied on his I-9 form.

Defendants do not deny that Shayan' s EAD had expired, that Shayan made requests to defendants for help with his EAD renewal, or that the firm filed an application for an extension or renewal
of Shayan's EAD on December 2, 2009. Instead, defendants' position on this point is not entirely clear. Defendants argue that they were hired by Shayan to address only the deportation hearings and the Stokes hearing, and that they did so successfully. Defendants do not deny Shayan's need for the extension of his EAD, or explain Castaneda's actions assisting Shayan with his EAD application, or why they did not file an application for an extension of his EAD prior to December 2, 2009. During his deposition, when asked why he did not take steps to extend Shayan's EAD, O'Malley replied that based upon conversations with Ali in "early 2008 into 2008 when he
"understood that [Shayan' s] attorney in Los Angeles was dealing with that issue (O'Malley tr at 81-82). "

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Documentary Evidence and CPLR 3211...What is Allowed?

Daughter works for a law firm, and hears of a financial opportunity. She gets her parents involved, and surprise...the loans do not work out! They sue the law firm for legal malpractice. Rodolico v Rubin & Licatesi, P.C. 2013 NY Slip Op 08068 [112 AD3d 608] December 4, 2013
Appellate Division, Second Department stands for two things. We discussed standing yesterday. The second is that there are a limited number of "documents" that can be utilized for a CPLR 3211(a)(1) motion.

"The Supreme Court also properly denied the branch of the defendants' motion which was to dismiss the sixth cause of action, alleging legal malpractice, pursuant to CPLR 3211 (a) (1). The evidence submitted in support of a motion pursuant to CPLR 3211 (a) (1) to dismiss a complaint on the ground that a defense is founded on documentary evidence "must be documentary or the motion must be denied" (Cives Corp. v George A. Fuller Co., Inc., 97 AD3d 713, 714 [2012], quoting Fontanetta v John Doe 1, 73 AD3d 78, 84 [2010] [internal quotation marks omitted]). " ' [N]either affidavits, deposition testimony, nor letters are considered documentary evidence within the intendment of CPLR 3211 (a) (1)' " (Cives Corp. v George A. Fuller Co., Inc., 97 AD3d at 714, quoting Granada Condominium III Assn. v Palomino, 78 AD3d 996, 997 [2010]; see Suchmacher v Manana Grocery, 73 AD3d 1017 [2010]; Fontanetta v John Doe 1, 73 AD3d at 86).

Here, the only evidence submitted by the defendants that pertained to the legal malpractice cause of action were affidavits. Accordingly, since the defendants failed to support the branch of their motion seeking to dismiss the legal malpractice cause of action pursuant to CPLR 3211 (a) (1) with "documentary" evidence, it was properly denied (see Cives Corp. v George A. Fuller Co., Inc., 97 AD3d at 714; Integrated Constr. Servs., Inc. v Scottsdale Ins. Co., 82 AD3d 1160, 1163 [2011]; Fontanetta v John Doe 1, 73 AD3d at 86)."

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Corporations, Individuals and Legal Malpractice

Daughter works for a law firm, and hears of a financial opportunity.  She gets her parents involved, and surprise...the loans do not work out!  They sue the law firm for legal malpractice.  Rodolico v Rubin & Licatesi, P.C.   2013 NY Slip Op 08068 [112 AD3d 608]   December 4, 2013
Appellate Division, Second Department  stands for two things.  The first is that standing is very, very important in legal malpractice.  If you did not hire the attorney, you may not sue the attorney.

"In support of that branch of their cross motion which was to dismiss the complaint [*2]for lack of standing, the defendants argued that the plaintiff had no interest in the loaned funds because two of the loans, for which the plaintiff sought recovery in the second and fourth causes of action, were funded by C&R, and three of the loans, for which the plaintiff sought recovery in the first, third, and fifth causes of action, were funded by Joanne. The plaintiff does not deny that the funds for two of the loans were provided by C&R, but merely asserts that he and Joanne own C&R. However, "[f]or a wrong against a corporation a shareholder has no individual cause of action, though he loses the value of his investment" (Abrams v Donati, 66 NY2d 951, 953 [1985]; see Citibank v Plapinger, 66 NY2d 90, 93 n [1985]; Elenson v Wax, 215 AD2d 429 [1995]; General Motors Acceptance Corp. v Kalkstein, 101 AD2d 102, 106 [1984]). Here, the plaintiff's action was brought in his own name, and there is nothing in the complaint to indicate that the plaintiff brought this action in a derivative capacity, on behalf of C&R. Accordingly, since the plaintiff does not have standing, individually, to seek the return of funds purportedly borrowed from C&R by the defendants, the second and fourth causes of action should have been dismissed insofar as they were asserted by the plaintiff in his individual capacity."

The same is not true, however, of the first, third, and fifth causes of action, which sought the return of funds that the defendants allege were provided by Joanne. The plaintiff and Joanne averred that, although Joanne went to the bank to purchase the bank checks, they do not keep their finances separate, and the funds belonged to both of them. The defendants presented no evidence to the contrary. The plaintiff, therefore, had standing to seek the return of the funds (see generally Wells Fargo Bank Minn., N.A. v Mastropaolo, 42 AD3d 239, 242 [2007]), and the Supreme Court properly denied the branch of the defendants' motion which sought dismissal of the first, third, and fifth causes of action for lack of standing.

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The Very Narrow Privity Exception in Legal Malpractice

For social policy reasons, and probably to prevent wide-spread suits against opposing attorneys which might swamp the system, a legal malpractice complaint must allege an attorney-client relationship in order to survive.  This question of privity is the first of several thresholds that a plaintiff must cross.  In Mr. San, LLC v Zucker & Kwestel, LLP  2013 NY Slip Op 08416 [112 AD3d 796]  December 18, 2013  Appellate Division, Second Department  we see a case which slips into the exception.

"On a motion to dismiss pursuant to CPLR 3211 (a) (1), "dismissal is warranted only if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law" (Leon v Martinez, 84 NY2d 83, 88 [1994]). In deciding a motion to dismiss pursuant to CPLR 3211 (a) (7), the court must "accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory" (Leon v Martinez, 84 NY2d at 87-88).

Applying these principles, the Supreme Court properly denied those branches of the defendants' motion which were pursuant to CPLR 3211 (a) (1) and (7) to dismiss the first cause of action, which sought to recover damages for legal malpractice. While the complaint does not allege an attorney-client relationship between the plaintiffs and the defendants, it sets forth a claim which falls within "the narrow exception of fraud, collusion, malicious acts or other special circumstances" under which a cause of action alleging attorney malpractice may be asserted absent a showing of privity (Ginsburg Dev. Cos., LLC v Carbone, 85 AD3d 1110, 1112 [2011] [internal quotation marks omitted]; see Aranki v Goldman & Assoc., LLP, 34 AD3d 510, 511-512 [2006]; Griffith v Medical Quadrangle, 5 AD3d 151, 152 [2004]). Furthermore, the documentary evidence submitted by the defendants does not conclusively establish a defense to this cause of action as a matter of law (see CPLR 3211 [a] [1])."

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So Many Legal Malpractice Principals Overlooked

Dombrowski v Bulson  2012 NY Slip Op 04203 [19 NY3d 347]  May 31, 2012  Lippman, Ch. J.  Court of Appeals was a very important case in legal malpractice, which held that "an award of nonpecuniary damages is generally unavailable to a plaintiff in an action for attorney malpractice."  It was not wholly unprecedented.  Prior to that it was well understood that emotional disturbance damages were not available in legal malpractice.  In Borges v Placeres  2014 NY Slip Op 24053 [43 Misc 3d 61], Appellate Term, 1st Department (2014), defense attorney failed to raise any objection to the jury charge permitting pain and suffering damages.  Even a statute of limititations defense was overlooked.

"Defendant's various assignments of error regarding the conduct of the trial are lacking in merit. The jury charge as a whole conveyed the correct legal principles (see Georgescu v City of New York, 107 AD3d 946 [2013]). Plaintiff was not required to prove that "but for" defendant's [*2]negligence, he would have prevailed in the immigration case; rather, his trial burden here was limited to proving that he would not have incurred damages but for defendant's pursuit of an unreasonable course of action (see Tenesaca Delgado v Bretz & Coven, LLP, 109 AD3d 38, 44 [2013]; see also Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442 [2007]). Nor was it reversible error for the court to include in the verdict sheet a question regarding whether defendant's alleged malpractice was a "substantial factor" in causing any injury to plaintiff (see Barnett v Schwartz, 47 AD3d 197, 204-205 [2007]; see also Martonick v Pudiak, 285 AD2d 935, 936 [2001]). Contrary to defendant's contention, there is simply no indication that the verdict sheet, when viewed in the context of the charge as a whole (see Iasello v Frank, 257 AD2d 362 [1999]), caused confusion or doubt among the jurors over the applicable principles of law (see McFadden v Oneida, Ltd., 93 AD3d 1309, 1311 [2012]).

[2]; {**43 Misc 3d at 64}With respect to damages, it need be emphasized that our review of the jury's award may not be based on the recent decisional law relied upon by defendant—precedent holding that an award of nonpecuniary damages is generally unavailable to a plaintiff in an action for attorney malpractice (see Dombrowski v Bulson, 19 NY3d 347 [2012]). Notably, defendant did not raise an objection to the jury charge as given, instructing the jury that they could award plaintiff damages for pain and suffering, or to the corresponding question on the verdict sheet, and, indeed, defendant raised no objection at trial to the introduction of evidence regarding the mental and emotional disturbance caused by plaintiff's detention. Thus, the court's unexcepted to jury charge became the law of the case, or more accurately, "consent . . . to the law to be applied" (Martin v City of Cohoes, 37 NY2d 162, 165 [1975]; see Knobloch v Royal Globe Ins. Co., 38 NY2d 471, 477 [1976]). Moreover, defendant does not otherwise argue that the award of damages deviated materially from what would be reasonable compensation (see Harvey v Mazal Am. Partners, 79 NY2d 218, 225 [1992]).

[3]; Turning to the propriety of the denial of defendant's eve-of-trial motion to amend his answer, we find no abuse of the court's discretion. Defendant's motion for leave to include the statute of limitations as a defense was made approximately eight years after he served his initial answer, and after plaintiff engaged in discovery, motion practice and placed the case on the trial calendar, presumably spending considerable time and expense preparing for trial. "

 

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All Is Lost Except the Legal Malpractice Case

Plaintiff has an excessive force claim against the NYCPD.  Arrest is on 9/15/09. ACD is given on 3/25/10.  Plaintiff retains law firm on 10/27/10.  On 5/16/11 law firm returns case to client and says they will not handle.  No notice of claim is ever filed, and no real motion seeking leave to file a late notice of claim is ever made.  Result?

 "In the motion sub judice, the City seeks (1) dismissal of plaintiff=s state law claims based on her failure to serve a notice of claim and failure to timely commence the action within the one  year-and-ninety-day statute of limitations set forth in General Municipal Law '50-i(1)(c), and (2) dismissal of any federal claims predicated on the violation of USC '1983 as barred by the three-year statute of limitations applicable to such actions (see Saunders v. State of New York, 629 FSupp 1067, 1070 [N.D. N.Y. 1986]). "

"It is a condition precedent to the maintenance of any tort action against the City that a Notice of Claim be served upon it within 90 days after a claim arises (see General Municipal Law '50-e[1][a]; 50-i[1][a]). Of course, it is statutorily provided that a court may, in the exercise of its discretion, extend the 90-day time limit (see General Municipal Law '50-e[5]; "

"Here, not only has plaintiff failed to serve a Notice of Claim upon the City, but she has likewise failed to move for leave to serve a late Notice of Claim as authorized by General Municipal Law '50-e(5). Moreover, although a certain level of laxity in matters of procedure traditionally have been overlooked where a party is proceeding pro se, plaintiff at bar has provided this Court with no proof whatsoever of the City=s acquisition of actual knowledge of the essential facts constituting her claim within 90 days after the claim arose or within a reasonable time thereafter@ (General Municipal Law '50-e[5])."

"Thus, this Court has no alternative but to dismiss her action against the City as barred by
the Statute of Limitations in General Municipal Law '50-i(1)(c). Nevertheless, it should be noted
that plaintiff"s malpractice action against her attorneys Jason Leventhal and Klein is still pending."

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Legal Malpractice Case and Insurance Exclusions

Sometimes the question of legal malpractice is at the forefront of a case, and sometimes it is the least important part.  in K2 Inv. Group, LLC v American Guar. & Liab. Ins. Co2014 NY Slip Op 01102 [22 NY3d 578]  February 18, 2014  Judge Smith of the Court of Appeals makes the rare admission of their mistake, and agrees that on a motion to renew, the decision should be reversed.

"In K2-I, we affirmed an order granting plaintiffs summary judgment, holding that American Guarantee's breach of its duty to defend barred it from relying on policy exclusions. We later granted reargument (21 NY3d 1049 [2013]), and we now vacate our prior decision and reverse the Appellate Division's order.{**22 NY3d at 585}"

In Servidone—a case in which, as in this one, the insurer was relying on policy exclusions in defending against a suit for indemnification—we stated the question as follows:

"Where an insurer breaches a contractual duty to defend its insured in a personal injury action, and the insured thereafter concludes a reasonable settlement with the injured party, is the insurer liable to indemnify the insured even if coverage is disputed?" (64 NY2d at 421.)
We answered the question in Servidone no. In K2-I, we held that "when a liability insurer has breached its duty to defend its insured, the insurer may not later rely on policy exclusions to escape its duty to indemnify the insured for a judgment against him" (21 NY3d at 387). The Servidone and K2-I holdings cannot be reconciled.

 

In short, to decide this case we must either overrule Servidone or follow it. We choose to follow it.

There is much to be said for the rule of K2-I, as our previous opinion shows; but, as the Servidone opinion shows, there is also much to be said for the Servidone rule. Several states follow the Servidone approach (e.g. Sentinel Ins. Co., Ltd. v First Ins. Co. of Haw., Ltd., 76 Haw 277, 290-297, 875 P2d 894, 907-914 [1994]; Polaroid Corp. v Travelers Indem. Co., 414 Mass 747, 760-766, 610 NE2d 912, 919-923 [1993]), while others adopt a rule like that of K2-I (e.g. Employers Ins. of Wausau v Ehlco Liquidating Trust, 186 Ill 2d 127, 150-154, 708 [*4]NE2d 1122, 1134-1136 [1999]; Missionaries of Co. of Mary, Inc. v Aetna Cas. & Sur. Co., 155 Conn 104, 112-114, 230 A2d 21, 25-26 [1967]). A federal district judge, writing in 1999, said that "[t]he majority of jurisdictions which have considered the question" follow the Servidone rule (Flannery v Allstate Ins. Co., 49 F Supp 2d 1223, 1227 [D Colo 1999]).

Under these circumstances, we see no justification for overruling Servidone. Plaintiffs have not presented any indication that the Servidone rule has proved unworkable, or caused{**22 NY3d at 587} significant injustice or hardship, since it was adopted in 1985. When our Court decides a question of insurance law, insurers and insureds alike should ordinarily be entitled to assume that the decision will remain unchanged unless or until the legislature decides otherwise. In other words, the rule of stare decisis, while it is not inexorable, is strong enough to govern this case.

"

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Negligent Drug Testing and Legal Malpractice: Not the Same!

Plaintiff is on probation and gives an oral sample for drug testing.  Kroll labs tests the saliva and finds THC.  An independent urine drug test taken as a safety measure by Plaintiff is negative.  Plaintiff's probation period is extended.  There are no pecuniary losses.  May Plaintiff recover. 

Here, yes.  If it were legal malpractice, no.  Why?  InLandon v Kroll Lab. Specialists, Inc.  2013 NY Slip Op 06597 [22 NY3d 1]  October 10, 2013 Lippman, J. , the Court of Appeals tells us that legal malpractice is different.

"In addition, we reject defendant's argument that plaintiff failed to allege that he has suffered a cognizable harm (see e.g. Martinez v Long Is. Jewish Hillside Med. Ctr., 70 NY2d 697, 699 [1987] ["where there is a breach of a duty owed by defendant to plaintiff, the breach of that duty resulting directly in emotional harm is actionable"]). In this procedural posture, {**22 NY3d at 8}plaintiff's allegations of the loss of freedom occasioned by the extension of his probation and the resulting emotional and psychological harm are sufficient to withstand a motion to dismiss. Defendant places too much weight upon our recent decision in Dombrowski v Bulson (19 NY3d 347 [2012]), characterizing it as holding that loss of freedom damages are not recoverable in negligence actions. In that case, we found that a legal malpractice action did not lie against a criminal defense attorney to recover nonpecuniary damages. The decision was based in part on policy considerations, including the potentially devastating consequences such liability would have on the criminal justice system and, in particular, the possible deterrent effect it would have on the defense bar concerning the representation of indigent defendants (see Dombrowski, 19 NY3d at 352). Similar policy considerations do not weigh in defendant's favor here."

 

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