New York Attorney Malpractice Blog

New York Attorney Malpractice Blog

Accounting Malpractice Even When the Work was Limited

Posted in Legal Malpractice Cases

CPA firm is hired to do taxes for a medical corporation.  Medical corporation’s bookkeeper is stealing large amounts of money, and is eventually discovered.  Was the CPA firm, which was not hired to investigate, nor to monitor the bookkeeper potentially liable?

JAG Orthopedics, P.C. v AJC Advisory Corp.  2015 NY Slip Op 51111(U)  Decided on July 21, 2015  Supreme Court, Kings County  Demarest, J. says, yes, it can be liable.

“Plaintiff’s claims against defendants arise out its allegations that defendant Lydia Vecchio Ferrante, plaintiff’s officer manager from September 2009 to June 2014, misappropriated/embezzled hundreds of thousands of dollars from plaintiff by: (1) writing checks to herself well in excess of her monthly salary of $4,000; (2) obtaining, without authorization from plaintiff, a debit/credit card tied to plaintiff’s checking account and charging items for her own personal use; (3) forging the signature of plaintiff’s owner and president, Andrew Miller, M.D., on checks made out in her name, and (4) misappropriating funds from a checking account that plaintiff had closed prior to the misappropriation. Santander’s liability is premised on its alleged failure to close a checking account in plaintiff’s name from which Ferrante appropriated funds and also its processing checks forged by Ferrante made out to Ferrante. The AJC Defendants’ liability is primarily premised on their [*3]failure to inform plaintiff of Ferrante’s misappropriation of plaintiff’s assets that was evident from financial records submitted to the AJC Defendants for them to prepare plaintiff’s taxes.

According to the second amended complaint, plaintiff, a provider of orthopedic services, hired Lydia Ferrante in September 2009, and in her role as office manager, she was, among other things, in charge of billing, payment of office bills, and receiving and reconciling bank statements (Second Amended Complaint at ¶¶ 12-13). In order to carry out these duties, plaintiff made Ferrante [FN2] an authorized signatory on its checking account (the 4933 account) with Santander (Second Amended Complaint at ¶ 15). In August 2013, Dr. Miller went to a Santander branch and requested that it close the 4933 account and that it transfer the funds in that account to a new account for plaintiff (the 0089 account) opened by Dr. Miller (Second Amended Complaint at ¶¶ 18-19, 29). Although plaintiff gave Ferrante a check book relating to the new 0089 account, Ferrante was not given any authority to write checks on that account, which authority was only maintained by Dr. Miller (Second Amended Complaint at ¶ 20).”

“Initially, the court addresses the portion of the AJC Defendants’ motion seeking [*5]dismissal of plaintiff’s malpractice claim against them. “A claim of professional negligence requires proof that there was a departure from the accepted standards of practice and that the departure was a proximate cause of the injury” (Bruno v Trus Joist a Weyerhaeuser Bus., 87 AD3d 670, 672 [2d Dept 2011]; see also Schwartz v Leaf, Salzman, Manganelli, Pfiel & Tendler, LLP, 123 AD3d 901, 902 [2d Dept 2014]; Kristina Denise Enters., Inc. v Arnold, 41 AD3d 788, 788 [2d Dept 2007]). The AJC Defendants’ primary contention regarding the malpractice claim is that they were simply hired to prepare plaintiff’s income taxes, not to audit plaintiff’s books or to act as bookkeepers, and as such, had no duty to discover or report Ferrante’s misappropriations. Plaintiff’s claim, however, is not that the AJC Defendants were hired to discover or ferret out Ferrante’s wrongdoing through an audit or a financial review,[FN4] but rather, that information in plaintiff’s ledgers and the financial information used by the AJC Defendants in order to prepare the tax returns raised questions about the propriety of Ferrante’s payments to herself such that they had a duty to inform plaintiff of the questionable practices. Based upon the Affidavit of Gary Hoffman, a licensed tax preparer and tax accountant, describing the standards applicable to tax preparers such as defendants, these allegations sufficiently plead a departure from accepted accounting practices (see 1136 Tenants’ Corp. v Rothenberg & Co. (36 AD2d 804 [1st Dept 1971], affd 30 NY2d 585 [1972]) (“even if defendant were hired to perform only write-up’ services, it is clear, beyond dispute, that it did become aware that material invoices purportedly paid by Riker were missing, and, accordingly, had a duty to at least inform plaintiff of this. But even this it failed to do. Defendant was not free to consider these and other suspicious circumstances as being of no significance and prepare its financial reports as if same did not exist”); see also Collins v Esserman & Pelter, 256 AD2d 754, 756-757 [3d Dept 1998]; Board of Trustees of IBEW Local 43 Elec. Contrs. Health & Welfare, Annuity & Pension Funds v D’Arcangelo & Co., LLP, 124 AD3d 1358, 1359 [4th Dept 2015]; Hall & Co. v Steiner & Mondore, 147 AD2d 225, 228 [3d Dept 1989]).

The AJC Defendants argument that they may not be held liable for malpractice because plaintiff made Ferrante its agent in dealing with the AJC Defendants is improperly raised for the first time in reply (see U.S. Bank N.A. v Sarmiento, 121 AD3d 187, 208 [2d Dept 2014]; Congel v Malfitano, 61 AD3d 809, 810 [2d Dept 2009]). Even if this argument could be seen as a response to arguments raised by plaintiff in its opposition papers, plaintiff’s giving Ferrante the responsibility for “interacting” with AJC on plaintiff’s behalf (Second Amended Complaint at ¶ 13) does not, in itself, vitiate AJC’s duty to plaintiff, as in performing the tax preparation services on plaintiff’s behalf, Ferrante’s improper conduct was undoubtedly recognizable as adverse to plaintiff’s interests (see Schwartz, 123 AD3d at 902-903; Capital Wireless Corp. v Deloitte & Touche, 216 AD2d 663, 666 [3d Dept 1995]; see also Collision Plan Unlimited, Inc. v Bankers Trust Co., 63 NY2d 827, 830 [1984]; 1136 [*6]Tenants’ Corp., 36 AD2d at 804-805; 2A NY Jur 2d, Agency and Independent Contractors § 103). Similarly, while it appears that plaintiff’s own negligence in monitoring Ferrante enabled Ferrante to continue her scheme for several years, the pleadings do not show it to be the sole proximate cause of the loss since such negligence does not appear to have impeded the AJC Defendants performance of their duties in reviewing plaintiff’s tax materials (see Collins, 256 AD2d at 757).

Accordingly, plaintiff’s allegations sufficiently plead a departure from accepted accounting practices. In addition, this alleged failure to inform plaintiff of the improprieties apparent from the financial record certainly could be seen as a proximate cause of damages suffered in that plaintiff, if it had earlier knowledge of Ferrante’s misdeeds, may have been able to prevent some of her misconduct (see Collins, 256 AD2d at 756-758; see also Kocak v Egert, 280 AD2d 335, 336 [1st Dept 2001]; CAE Indus. v KPMG Peat Marwick, 193 AD2d 470, 473 [1st Dept 1993]; cf. Leigh Mgt. Assoc. v Weinstein, 251 AD2d 225, 226 [1st Dept 1998]).”

Privity as the Main Gatekeeper in Legal Malpractice

Posted in Legal Malpractice Cases

Who may sue an attorney for legal malpractice?  In most cases (and that means almost all the time) only the party that hired and contracted with the attorney.  East 51st St. Dev. Co., LLC v Lincoln Gen. Ins. Co.  2015 NY Slip Op 31245(U)  July 17, 2015 Supreme Court, New York County Docket Number: 150063/2010 Judge: Carol R. Edmead is an example of two very sophisticated consumers fighting over attorney fees and other problems.  These two insurance companies, which are on the hook for an extraordinarily bad crane accident, seem to have overlooked the question of privity.

“In this insurance d.eclaratory judgment action, Lincoln General Insurance Company
(“Lincoln General”) seeks, by separate motions, leave to supplement its affirmative defenses and
leave to assert a third party action against the lawfirm, O’Melveny and Meyers, LLP (“OMM”)
which defends plaintiff East 51″ Street Development Company, LLC (“East 51 “”) in numerous
tort and property damage cases.”

“Lincoln General’s claims premised on equitable subrogation lacks merit.
Lincoln General failed to assert sufficient “wrongdoing” on the part of OMM, or cite any
authority for the position that the fees charged by OMM, in and of themselves, constitute
‘\>TOngdoing” under any theory oflaw, let alone under the theory of equitable subrogation. Here,
Illinois Union retained OMM to defend East 51” in the Crane Collapse Litigation. The mere
allegation that OMM placed its interests in recovering a fee ahead of its duties of loyalty and care
to Illinois Union and East 51 st, to the detriment of Lincoln General who is obligated to pay the
defense costs incurred, is unsupported by the papers or the proposed third party complaint.
Notably, in reply, Lincoln General concedes that it is not asserting that OMM committed legal
ma! practice.  To apply the doctrine as urged by Lincoln General, Lincoln General, as the an insurer,who is duty bound to pay “losses” (defense costs) of its insured (East 5lst), seeks to be “placed in the position ofits insured” East 51 “,”so that it may recover from” OMM-the party Lincoln General claims is legally responsible forthe loss. OMM cannot be held liable for its own
“reasonable” defense costs. Therefore, application of the doctrine to Lincoln General  is nonsensical. And again, the “loss” Lincoln General claims it stands to suffer, is the payment
toward “reasonable” defense costs, which the First Department has already determined is
As acknowledged by Lincoln General, the doctrine of equitable subrogation allows it to 1
“step into the shoe~” of Illinois Union and/or East 51 to assert claims they have a right to bring.
However, the only claim Illinois Union and/or East 51″ may have to bring against OMM, as
relevant to this instant action, concern the reasonableness of attorneys’ fees. No third-party cause
of action against OMM is warranted in this regard.
Lincoln General contends that to disallow it from proceeding against OMM “under the
principles of equitable subrogation would completely absolve OMM from liability associated
with its actions which deviated from fiduciary standards, and would place the loss for such
deviation on Lincoln General and the co-primary insurers.” However Lincoln General alleges no
specific conduct constituting a breach of fiduciary obligations. Again, it bears repeating that
Lincoln General concedes that it does not claim that OMM committed malpractice. “

“Effectively Compelled” and Legal Malpractice

Posted in Legal Malpractice Cases

Plaintiff settles a case handled by her attorney and is dissatisfied.  Dissatisfaction is normal after a settlement, goes the saying, because everyone has compromised and no one is happy.  However, what if the settlement was required because legal malpractice had changed the landscape?  What if the attorneys’ mistakes had required that the plaintiff salvage something and get whatever money could still be had?

Plaintiffs who are “effectively compelled” to settle a case may still sue the attorney.  Stein v Chiera  2015 NY Slip Op 06234   Decided on July 22, 2015  Appellate Division, Second Department is the Second Department’s latest pronouncement on this issue.

“To state a cause of action to recover damages for legal malpractice, a plaintiff must allege that the attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession, and that the attorney’s failure was a proximate cause of actual and ascertainable damages (see AmBase Corp. v Davis Polk & Wardwell, 8 NY3d 428, 434-435; Randazzo v Nelson, 128 AD3d 935; Held v Seidenberg, 87 AD3d 616, 617). To establish causation, it is sufficient that the plaintiff allege that, but for the defendant attorney’s failure to exercise ordinary reasonable skill and knowledge, there would have been a more favorable outcome in the underlying proceeding (see Mackey Reed Elec., Inc. v Morrone & Assoc., P.C., 125 AD3d 822, 823). Even when the underlying proceeding has settled, a plaintiff may state a cause of action alleging legal malpractice, upon sufficiently alleging that the settlement was ” effectively compelled by the mistakes of counsel'” (Tortura v Sullivan Papain Block McGrath & Cannavo, P.C., 21 AD3d 1082, 1083, quoting Bernstein v Oppenheim & Co., 160 AD2d 428, 430; see Schiff v Sallah Law [*3]Firm, P.C., 128 AD3d 668).”

Here, as applied, there was no compulsion.  “Inasmuch as the plaintiff’s allegation against Chiera was based on the incorrect premise that Chiera’s alleged negligence caused the plaintiff’s cause of action to become time-barred, it is clear that any failure by Chiera in the prosecution of the 2005 action did not “effectively compel” the plaintiff to settle the 2006 action for less than its full value (see Schiff v Sallah Law Firm, P.C., 128 AD3d 668; Leiner v Hauser, 120 AD3d 1310, 1312; Keness v Feldman, Kramer & Monaco, P.C., 105 AD3d 812, 813).”

Wrongful Death Statutes of Limitation and Legal Malpractice

Posted in Legal Malpractice Cases

Anyone can get it wrong, but it appears that all the litigants and Supreme Court all got this lawschool question of statutes of limitation wrong in Stein v Chiera  2015 NY Slip Op 06234 Decided on July 22, 2015  Appellate Division, Second Department.  The AD Panel gives us a lesson in medical malpractice statutes of limitation and wrongful death statutes of limitation.

“In November 2005, the plaintiff, Tracy Stein, and her now-deceased husband, Allan Stein (hereinafter the decedent), retained the defendants, Randall J. Chiera and Chiera & Associates (hereinafter together Chiera), to commence an action on their behalf to recover damages for medical malpractice based on the failure of various medical professionals to timely diagnose the decedent’s lung cancer. On November 7, 2005, the decedent died, and on the same day, Chiera commenced an action, inter alia, seeking damages for medical malpractice (hereinafter the 2005 action). Chiera failed to serve the defendants in the 2005 action and, eventually, that action was dismissed. In October 2006, the plaintiff retained the third-party defendants, Joseph M. Lichtenstein and the Law Offices of Joseph M. Lichtenstein, P.C. (hereinafter together Lichtenstein), to commence a new action to recover damages for medical malpractice and wrongful death, on behalf of the plaintiff individually and as executor of the decedent’s estate. On October 16, 2006, less than a year after the decedent’s death, Lichtenstein commenced an action on the plaintiff’s behalf (hereinafter the 2006 action). Ultimately, the 2006 action was settled.

Before the 2006 action settled, the plaintiff commenced this action, inter alia, to recover damages for legal malpractice against Chiera. In an amended complaint, she alleged that, as a result of Chiera’s failure to properly serve the defendants in the 2005 action and the consequent dismissal of that action, some of her claims were untimely when she commenced the 2006 action. Specifically, the plaintiff alleged that some of the acts of medical malpractice underlying her wrongful death cause of action had taken place more than 2½ years before she commenced the 2006 action. As a result of Chiera’s alleged legal malpractice in failing to timely serve the defendants in the 2005 action, the plaintiff was forced to accept a settlement in the 2006 action for “a far lower amount” than “the full value of [the] medical malpractice claims.”

After being served with the plaintiff’s complaint, Chiera commenced a third-party action against Lichtenstein for contribution and common-law indemnification. Chiera alleged that Lichtenstein’s deficient representation, not Chiera’s, was the proximate cause of the plaintiff’s acceptance of a settlement for less than the full value of her claims. Lichtenstein moved pursuant to CPLR 3211(a) to dismiss the third-party complaint. Chiera, in turn, moved pursuant to CPLR 3211(a) to dismiss the complaint. The Supreme Court granted Lichtenstein’s motion to dismiss Chiera’s third-party complaint,and a judgment was entered dismissing that third-party complaint. The Supreme Court denied Chiera’s motion to dismiss the complaint. Chiera appeals.”

“Here, the plaintiff’s factual allegations fail to state a cause of action to recover damages for legal malpractice against Chiera. First, any medical malpractice cause of action to recover damages for pain and suffering that was viable on the date that the decedent died was still viable when Lichtenstein commenced the 2006 action less than one year later (see CPLR 210[a]; EPTL 11-3.2[b]; Cancel v Posner, 82 AD3d 575, 575-576; cf. Muniz v Mount Sinai Hosp. of Queens, 91 AD3d 612, 616). Second, any wrongful death cause of action against those medical professionals based on the same acts of medical malpractice was also timely when the plaintiff commenced the 2006 action. EPTL 5-4.1 provides a two-year statute of limitations for a wrongful death cause of action: “The personal representative, duly appointed in this state or any other jurisdiction, of a decedent who is survived by distributees may maintain an action to recover damages for a wrongful act, neglect or default which caused the decedent’s death against a person who would have been liable to the decedent by reason of such wrongful conduct if death had not ensued. Such an action must be commenced within two years after the decedent’s death” (EPTL 5-4.1[1]).

Additionally, the statute of limitations for medical malpractice is 2½ years (see CPLR 214-a). Thus, the plaintiff had 2 years from the date of the decedent’s death, November 7, 2005, to assert a wrongful death cause of action for any act of medical malpractice that occurred within 2½ years before the date of the decedent’s death (see Baron v Brown, 101 AD3d 915, 917; Vendittai v St. Catherine of Sienna Med. Ctr., 98 AD3d 1035, 1036). Contrary to the plaintiff’s contention and the Supreme Court’s holding, the 2½-year lookback period ran not from the commencement of the 2006 action in October 2006, but from the date of the decedent’s death, November 7, 2005. In other words, no cause of action alleging wrongful death that would have been timely on November 7, 2005, was untimely in October 2006 (see Baron v Brown, 101 AD3d at 917; Venditti v St. Catherine of Siena Med. Ctr., 98 AD3d at 1036; Capece v Nash, 70 AD3d 743, 745-746; Mikus v Rosell, 62 AD3d 674, 675; Scanzano v Horowitz, 49 AD3d 855, 856-857; Norum v Landau, 22 AD3d 650, 651; Murphy v Jacoby, 250 AD2d 826, 826).”

A Church is Twice Sold…Is It The Attorney’s Fault?

Posted in Legal Malpractice Cases

We’re scratching our heads on this one.  A Brooklyn Church decides to sell its real estate after 50+ years.  It finds a developer who offers a couple of million dollars for the Bedford Avenue property, and the church has its longtime attorney draft up the contracts of sale.  Downpayments are exchanged and then nothing happens.  A couple of years later the Church decides to sell to someone else, and the same attorney drafts up the contracts of sale.  Soon, all the buyers are suing the Church, and the Church goes into default.  How could this happen with a competent attorney handling matters?

1200 Bedford Ave., LLC v Grace Baptist Church  2015 NY Slip Op 51045(U)  Decided on July 17, 2015  Supreme Court, Kings County  Schack, J. may be a prototypical New York real estate story, but there is no explanation for the attorney’s work.  Result?  He’s in the case, and the default has been lifted.


Defendant CHURCH retained WAY to represent it for these transactions and obtain the requisite approvals for the sales of church property from the New York State Attorney General. WAY received $345,000 in down payments from FREUND’s two LLC’s, as CHURCH’s escrow agent. The Attorney General never approved these sales.

In June 2011, after more than one year of inaction, FREUND’s two LLC’s, the purchasers of the premises under the 2010 CONTRACTS commenced two lawsuits for specific performance of the 2010 CONTRACTS. INTERVENOR, on June 16, 2011, filed notices of pendency in each of these actions. Three years later, in June 2014, the two notices of pendency were renewed. Further, the two actions were consolidated in July 2014 and stayed pending the outcome of the instant action.

CHURCH, relying upon WAY, entered into a contract of sale with BEDFORD AVENUE, on December 27, 2011, for the sale of all three lots, 1194-1202 Bedford Avenue, Brooklyn, for $2,200,000, with a $110,000 down payment received by WAY as escrow agent. When CHURCH inquired of WAY if this was legitimate in light of the 2010 CONTRACTS, WAY misrepresented to CHURCH that the 2010 CONTRACTS were cancelled and it was proper to enter into a new contract of sale for the property.

Plaintiff BEDFORD AVENUE, in November 2012, commenced the instant action against defendant CHURCH for specific performance of the December 27, 2011-contract. Reverend Melvyn Louis Rankin, Pastor and President of defendant CHURCH, in his [*3]affidavit in support of the motion to implead WAY, states:

10. On or about late November 2012, after we received notification that this lawsuit was  commenced, I delivered a copy of the Summons and Complaint to Mr. Way requesting his legal services in defending the matter.Mr. Way informed me, “not to worry about it,” and that, he would “take care of it.”

It is clear that WAY misrepresented to defendant CHURCH that INTERVENOR’s 2010 CONTRACTS were canceled and that it was proper and appropriate that it enters into a new contract of sale for the subject premises with plaintiff BEDFORD AVENUE. Further, it appears that WAY acted incompetently and ineffectively advised defendant CHURCH to enter into three separate contracts of sale for all or part of the subject premises in June 2010 and

December 2011. After plaintiff BEDFORD AVENUE commenced the instant action and CHURCH’s Reverend Rankin contacted WAY, in November 2012, WAY misrepresented to Reverend Rankin “not to worry about it,” and that he would “take care of it.” A reasonable client could conclude that: after a lengthy relationship with its attorney such statements inferred that the attorney would appear in court in the matter, utilizing the legal knowledge, skill, thoroughness and preparation reasonably necessary for representation; and, its attorney would not neglect such an important matter entrusted to him. However, WAY failed to appear in the instant action nor file any papers on behalf of defendant CHURCH. Also, WAY failed to return phone calls to CHURCH’s representatives or respond whenever CHURCH inquired as to the status of the instant action.
Defendant CHURCH, as a result of WAY’s misrepresentations and neglect, was blind to the ongoing litigation against it and the Court granted the September 12, 2013 default judgment for specific performance of plaintiff BEDFORD AVENUE’s encumbered 2011 contract. At no time did Defendant CHURCH intend to abandon the instant action or anticipate that its status as rightful owner to the subject premises would be relinquished by the granting of a default judgment against it. Defendant CHURCH was unaware of the nature of the present litigation because it was unjustifiably misled by WAY, its former counsel.

Therefore, defendant CHURCH’s motion to implead Way is granted. Given the pre-existing 2010 CONTRACTS with INTERVENOR, the notices of pendency extending from these contracts, which predate the contract, litigation and notice of pendency in the instant action, defendant CHURCH can assert a defense on the merits of the instant action and should be allowed to defend itself accordingly and implead WAY for misrepresentation, neglect and legal malpractice.”

Is It Legal Malpractice or Is It Breach of Fiduciary Duty?

Posted in Legal Malpractice Cases

The difference between legal malpractice and Breach of Fiduciary Duty can be important. In Ferrara v Amritt-Hall  2015 NY Slip Op 31228(U)  July 13, 2015  Supreme Court, Queens County  Docket Number: 22203/11  Judge: Allan B. Weiss the difference is whether an attorney’s conduct is subject to a 3 or a 6-year statute of limitations.

The case revolves around a practice of salesmen going door-to-door and selling home renovation.  They promise a low cost loan, with a cash-out feature.  Plaintiff thought that she was replacing her old mortgage with a lower interest mortgage, getting her bathroom renovated and getting $ 7,000 cash out.  Sadly it did not work out.  When an attorney called her and suggested that he represent her at the closing, sadly it did not work out for him either.

“To state a cause of action for a breach of fiduciary duty, a plaintiff must allege (1) the existence of a fiduciary relationship, (2) misconduct by the defendant, and (3) damages directly caused by the defendant’s misconduct (see Baumann v Hanover Community Bank, 100 AD3d 814 [2012]; Rut v Young Adult Inst., Inc., 74 AD3d 776 [2010]). Here, Amritt-Hall alleges that Horn was acting in his capacity as her attorney in the refinancing transaction, and that such fiduciary relationship continued beyond the subject closing due to his representations that he would obtain a traditional refinanced loan on her behalf at a more favorable rate and with a more favorable term. She further alleges that she was injured because Horn intentionally and willfully solicited her with false information, failed to represent her interests at closing, failed to ensure that she had the information necessary for making informed decisions, and misled her into believing that she would obtain a more favorable loan after the subject closing. In moving to dismiss, Horn argues that Amritt-Hall has mislabeled what is essentially a legal malpractice claim instead as a breach of fiduciary duty claim involving fraud (with a six-year statute of limitations) in order to avoid the three-year statute of limitations for malpractice claims (CPLR 213, 214), which he avers has expired. In determining whether the claim sounds in malpractice or arises from a fiduciary relationship, the court looks to the essence of the claim rather than the form in which it is pleaded (see State v Cortelle Corp., 38 NY2d 83, 86 [1975]). A fiduciary relationship is defined as one “founded upon trust or confidence reposed by one person in the integrity and fidelity of another” (see Penato v George, 52 AD2d 939, 942 [1976]), the hallmark of which is an imbalance of power between the parties (see Langford v Roman Catholic Diocese of Brooklyn, 271 AD2d 494, 504 [2000]). Although the allegations herein are similar, this cause of action is sufficiently based on a violation of the trust AmrittHall placed in Horn to represent her in the loan transaction and secure refinancing thereafter, rather than some lack of skill or negligence in performing his duties (see generally Malmsteen v Berdon, LLP, 477 F Supp 2d 655, 661-662 [SDNY 2007]; cf. Matter of R.M. Kliment & Frances Halsband, Architects [McKinsey & Co., Inc.], 3 NY3d 538, 542 [2004]). Moreover, the third-party action was timely commenced before the six-year statute of limitations for a breach of fiduciary duty claim based on fraud had expired (CPLR 213). The court further notes that the breach of fiduciary duty claim is not duplicative of the fraud claim asserted against him (see KS v ES, 39 Misc 3d 1219[A], 2013 NY Slip Op 50664[U], *8 [2013]; cf. Stein v McDowell, 74 AD3d 1323, 1326 [2010]). Rather, the alleged fraud Horn perpetrated against his client was one way in which he violated the trust placed in him by virtue of the fiduciary nature of their relationship. As Amritt-Hall correctly notes, Horn’s reliance on Mecca v Shang (258 AD2d 569 [1999]) is misplaced, as it merely stands for the proposition that a separate claim for fraud does not exist when it is duplicative of a legal malpractice claim because it is based on concealment or intentional failure to disclose the attorney’s own lack of competence or legal expertise (see id., citing White of Lake George v Bell, 251 AD2d 777 [1998]), which is not alleged here.”

A $97,000 Mystery in Legal Malpractice

Posted in Legal Malpractice Cases

In the Surrogates’ Court, cases move slowly, in keeping with the universal understanding that the main character in the drama is dead.  Steffan v Wilensky   2015 NY Slip Op 31194(U)  July 8, 2015  Supreme Court, New York County  Docket Number: 150020/11  Judge: Cynthia S. Kern may well be an extreme example.  Decedent died in 1993, with about $100,000 in the bank.  The bank account was in two names, perhaps so that the second named person could pay medical bills for decedent.  It was not until 2006 that the executor sued the bank. Why the 13 year delay?

We don’t know, but we do know that the case

“In or around June 2006, Wilensky filed a proceeding against Chase in Surrogate’s Court,
New York County, pursuant to Surrogate’s Court Procedure Act (“SCPA”) § 2103 (the “SCPA
2103 Proceeding”) seeking delivery of the funds in the Chemical Accoui:it to the Estate. Chase
moved to dismiss the petition as time-barred, which was granted on or aoout May 7, 2009. In
dismissing the petition, the court held that the Estate’s “cause of action arose no later than 1999,
when. the bank acknowledged the existence of the account in its letter inviting reactivation.
Since the current proceeding was not commenced until 2006, it is barred ‘by the six-year statute
of limitations.”
In or around 2011, plaintiff commenced the instant action against’ Wilensky alleging a
cause of action for legal malpractice, specifically alleging that as counsel for the Estate,
Wilensky owed it a duty to render legal services in a competent and professional manner and to
act with ordinary and reasonable skill, care and diligence and that Wilensky instead acted
negligently under the circumstances by failing to, inter alia, timely file the SCPA 2103
Proceeding. Plaintiff now moves for an Order pursuant to CPLR § 3212 granting it summary
judgment on its complaint.
On a motion for summary judgment, the movant bears the burden of presenting sufficient
evidence to demonstrate the absence of any material issues of fact. See Alvarez v. Prospect
Hosp .. 68 N. Y.2d 320, 324 (1986). Once the movant establishes a prima facie right to judgment
as a matter of law, the burden shifts to the party opposing the motion to “produce evidentiary proof in admissible form sufficient to require a trial of material questions of fact on which he rests his claim.”  Zuckerman v. City of New York, 49 NY2d 557,562 (1980). However, mere conclusions, expressions of hope or unsubstantiated allegations or asserti.ons are insufficient” to defeat summary judgment. Id. A prima facie case for legal malpractice requires a plaintiff to establish “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. Spigel, 9 N.Y.3d 836 (2007) (quoting Am-Base Corp. V Davis Polk & Wardwell, 8 N.Y.3d 428, 434 (2007)). In the instant action, plaintiff has failed to establish its prima facie right to summary judgment on its claim for legal malpractice as it has failed to demonstrate that it would have succeeded on the merits of the SCPA 2103 Proceeding “but for” Wilensk:y’s negligence in untimely commencing the proceeding. Based on the evidence before this court, even if the SCPA 2103 Proceeding had been timely commenced, plaintiff has failed;to establish that it ” would have been successful as a matter of law as there exist issues of fact as to whether plaintiff would have been entitled to recover the funds in the Chemical Account pursuant to the Banking Law.”




The Ponzi Scheme and Legal Malpractice

Posted in Legal Malpractice Cases

Ponzi schemes, named for Charles Ponzi is a recurring situation for attorneys, especially those who meet with monied clients in transactional settings.  Biberaj v Acocella  2014 NY Slip Op 06165 [120 AD3d 1285]  September 17, 2014  Appellate Division, Second Department describes how an attorney-client relationship wandered into these storm tossed waters.

“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.”

Charting A Course to Dismissal

Posted in Legal Malpractice Cases

There are dismissals on the merits and there are dismissals which are not on the merits.  What difference, one might ask?  The major difference is whether the case may be brought again within 6 months under CPLR 205.

The next question is whether a dismissal under CPLR 3211, a common event, is on the merits or not on the merits.  Not only does it depend, but it depends on how the parties chart their own litigation course.  Meredith v Siben & Siben, LLP  2015 NY Slip Op 06120  Decided on July 15, 2015  Appellate Division, Second Department describes how the parties wandered from a mere motion in lieu of an answer into a motion for summary judgment.

“Initially, contrary to the plaintiff’s contention, the defendant did not waive its statute of limitations defense, asserted in its answer, by failing to make a pre-answer motion to dismiss (see Rich v Lefkowitz, 56 NY2d 276). Rather, a statute of limitations defense may be asserted after joinder of issue in a motion for summary judgment pursuant to CPLR 3212 (see Rich v Lefkowitz, 56 NY2d at 282). Although the defendant’s motion was made pursuant to 3211(a)(5), the parties clearly charted a summary judgment course by submitting extensive documentary evidence and factual affidavits laying bare their proof (see One Monroe, LLC v City of New York, 89 AD3d 812, 813; Tendler v Bais Knesses of New Hempstead, Inc., 52 AD3d 500, 502; Harris v Hallberg, 36 AD3d 857, 858-859; O’Dette v Guzzardi, 204 AD2d 291, 292; see also Schultz v Estate of Sloan, 20 AD3d 520; Kavoukian v Kaletta, 294 AD2d 646, 646-647). Thus, the defendant’s motion is properly treated as a motion for summary judgment dismissing the complaint as time-barred.”

The Continuing Continuous Representation Problem

Posted in Legal Malpractice Cases

Law Firm A starts to represent Plaintiff.  At some time afterwards, Law Firm B comes in.  Legal malpractice ensues.  Time goes by.  Can Law Firm A be held responsible for Plaintiff’s losses?  The answer depends on a number of salient issues, and the statute of limitations is one of them.  When does the statute of limitations commence for Law Firm A?

Meredith v Siben & Siben, LLP  2015 NY Slip Op 06120  Decided on July 15, 2015  Appellate Division, Second Department provides some discussion, but no absolute clarity.

“Further, the Supreme Court properly concluded that the plaintiff’s legal malpractice cause of action is time-barred. The defendant met its prima facie burden of demonstrating that the action was commenced more than three years after the alleged malpractice occurred (see Farage v Ehrenberg, 124 AD3d 159, 164; Fleyshman v Suckle & Schlesinger, PLLC, 91 AD3d 591, 592; Rupolo v Fish, 87 AD3d 684, 685). In opposition, the plaintiff failed to raise a triable issue of fact as to whether the statute of limitations was tolled by continuous representation (see Farage v Ehrenberg, 124 AD3d at 165; Fleyshman v v Suckle & Schlesinger, PLLC, 91 AD3d at 592). In that respect, the evidence demonstrated that after the plaintiff and her husband retained the defendant law firm to represent them in a personal injury action, the defendant law firm retained the law firm of Bauman & Kunkis, P.C. (hereinafter Bauman & Kunkis), to represent the plaintiff and her husband [*2]in that action, and thereafter had no contact with the plaintiff. All of the work on the case, from filing the pleadings to selecting a jury, was performed by Bauman & Kunkis. Before the case could be tried, it was dismissed based on willful default, and Bauman & Kunkis was substituted with a different law firm, which sought to restore the action. Even if the arrangement between the defendant and Bauman & Kunkis could be equated with joint representation, under the circumstances of this case, the defendant’s representation of the plaintiff would have terminated as of December 1, 2006, the date on which Bauman & Kunkis was substituted. Accordingly, the present legal malpractice cause of action, commenced on or about April 9, 2012, was untimely.”