Fraud and legal Representation

This case is one of the larger fraud - legal malpractice cases we have seen.  In fact, the scope of the fraud is breathtaking.  Proskauer Rose LLP is involved in the case, and walks away with dismissal.  Here are some of the facts in Chambers v Weinstein  2014 NY Slip Op 51331(U)
Decided on August 22, 2014  Supreme Court, New York County  Sherwood, J.

"The Complaint avers, among other things, that based on Schleider's false representations that [*2]he would invest in certain investment transactions and take steps to protect those investments, Plaintiffs lent up to $6.7 million to defendant 148 Investment LLC (148), a company owned by Todd. Id., ¶¶ 30-31. Schleider engaged the KS Defendants to represent Plaintiffs in transactions with 148. Id., ¶ 32. In February and March of 2012, based on Schleider's representation that Weinstein had access to large blocks of Facebook shares that they intended to purchase through 148 prior to an initial public offering (IPO) and then sell them at a substantially higher price, Plaintiffs lent a total of $3.025 million to 148 to purchase pre-IPO shares in three separate transactions. However, 148 purchased no Facebook shares and did not otherwise invest the money. Id., ¶¶ 35-50. Instead, Todd, Schlieder, Weinstein, Muschel and 148 engaged in self-dealings and used Plaintiffs' money for their own personal expenses. Id., ¶ 51.

To further the fraudulent Facebook scheme, Todd represented to Plaintiffs that the transactions would be secured by collateral valued at $12 million, consisting of mortgages 148 held against a property known as 1741-1751 Park Avenue, New York (Park Avenue Property). Id., ¶ 75. The complaint avers that defendant 121 Park had made a $6 million mortgage to Kahal securing the Park Avenue Property and recorded same in March 2008.[FN1] Id., ¶ 76. In November 2011, Kahal assigned the mortgage to 148, which was recorded in June 2012. However, in or about March 2012, 148 reassigned the mortgage to Kahal. Both of the collateral assignments were performed without any consideration, but rather were made to deceive Plaintiffs. Id., ¶¶ 79-81, 88.

The Complaint also avers that in September 2011, Belle Glade Gardens Realty Group, LLC (BGG), a Florida company owned and controlled by Schleider, entered into an agreement with Prince of Belle Glade Gardens, LLC to purchase Belle Glade Gardens, a 384-unit apartment complex, for $16.4 million. Complaint, ¶¶ 118-120. Schleider retained defendant Greenberg to represent BGG in the transaction. Id. Although BGG deposited $120,000, Greenberg returned the down-payment to BGG in November 2011, thus terminating the purchase agreement. Id., ¶ 121-122. In February and April 2012, Schleider represented to Plaintiffs that the BGG transaction was still active and that he would be matching their investment therein. Id., ¶¶ 123. Based on the representation, Plaintiffs wired $2.5 million to Greenberg in February 2012, which was deposited into an escrow account for Schleider and a subaccount for BGG. Id., ¶¶ 124-125. Schleider subsequently directed Greenberg to wire $2.5 million to 148, but misrepresented to Plaintiffs that the $2.5 million was being held by Greenberg for the transaction. Id., ¶ 128. In April 2012, Schleider induced Plaintiffs to make an additional $330,000 investment, but later directed Greenberg to deduct its legal fees from the $330,000 wired by Plaintiffs, without disclosing that the BGG deal was no longer active. Id., ¶¶ 129-132. Schleider intended to and fraudulently turned over the BGG funds to 148 for use by Schleider, Todd, Weinstein and 148. Id., ¶ 133.

In 2011, Weinstein was prosecuted by the United States in the United States District Court of New Jersey (2011 Action). Proskauer represented Weinstein from December 31, 2012 to May 30, 2013 in the 2011 Action. Complaint, ¶ 226. As compensation for its services, Proskauer charged Weinstein $1 million as a minimum non-refundable fee. On December 20, 2012, Kahal paid the fee with a check containing a reference stating "Loan Return for 148 LLC." Id., ¶¶ 227-228. The Complaint alleges that Proskauer did not perform adequate due diligence to insure that the retainer funds were not proceeds of Weinstein's criminal activities, and that Proskauer had "actual knowledge" that Weinstein was prohibited by the government in the 2011 Action from engaging in financial transactions of more than $1,000. Id., ¶¶ 230-231. On January 3, 2012, Weinstein entered into a plea agreement whereby he admitted to committing wire fraud and money laundering. On May 20, 2013, Weinstein was charged by the United States with various criminal activities (2013 [*3]Action). The indictment alleges that Proskauer received $1 million. The Complaint alleges that Proskauer spent the $1 million within two weeks of its receipt from Kahal, and that Proskauer paid "an unknown portion of these funds to persons unknown" for the benefit of Weinstein, and "thereby intentionally engaged in a scheme to defraud Plaintiffs by agreeing to launder' funds for Defendant Weinstein and prevent their recovery by Plaintiffs." Id., ¶¶ 240-241. Proskauer moved to be relieved as Weinstein's attorney in the 2011 Action, in light of the allegations in the 2013 Action. The motion was granted on May 30, 2013. Id., ¶¶ 236-237."

"To state a claim for aiding and abetting fraud, a plaintiff must allege the existence of the underlying fraud, actual knowledge, and substantial assistance. Oster v Kirschner, 77 AD3d 51, 55 [1st Dept 2010]; Stanfield Offshore Leveraged Assets, Ltd. v Metro. Life Ins. Co., 64 AD3d 472, 476 [1st Dept 2009].

In this case, the parties do not dispute that Weinstein committed fraud prior to 2011 involving victims other than Plaintiffs. In fact, Weinstein was sentenced for fraud in the 2011 Action. The dispute in this case lies in whether fraud perpetrated against Plaintiffs in 2012 is adequately stated in the Complaint, and whether Proskauer had "actual knowledge" and gave "substantial assistance." Notably, Plaintiffs' allegations in the Complaint are primarily based on sworn statements, dated May 13, 2013, made by an FBI agent, Karl Ubellacker, in connection with the government's complaint filed in the 2013 Action. A copy of Agent Ubellacker's statement is annexed as exhibit B to Plaintiffs' opposition to Proskauer's motion to dismiss.

In opposition to the motion, Plaintiffs contend that Proskauer's actual intent can be inferred from the following factual circumstances. Proskauer knew of the allegations against Weinstein in the 2011 Action because it served as his defense counsel. It knew that Weinstein was prohibited from engaging in transactions over $1,000 without the approval of the government's special counsel. It knew that the $1 million retainer was "probably directly or indirectly" proceeds of the 2011 Action. Kahal paid Proskauer's retainer with a check bearing a notation that it was a "Loan Return for 148 LLC." Proskauer accordingly knew that the check never went to 148, but was diverted to pay [*4]Weinstein's legal fees, just as he had diverted funds in the 2011 Action. Additionally, after learning that the government might try to seize the diverted funds, Proskauer was told by Weinstein to "minimally" inquire about the source of funds with Todd, who replied in a manner as directed by Weinstein. Lastly, Weinstein admitted that the fraudulent scheme in the 2011 and 2013 Actions "was a key component of both." Plaintiffs' opposition, ¶¶ 53-63.

Plaintiffs' contentions are insufficient to defeat the motion. That a law firm represents a client accused of a prior fraud against certain victims does not support an inference that the firm knew about, much less aided and abetted, a subsequent fraud committed by the client against other victims. Here, the government's complaints in the 2011 and 2013 Actions named different sets of victims and Plaintiffs were not named in the 2011 Action. Thus, Weinstein's retention of Proskauer as defense counsel in connections with the 2011 Action does not support an inference that Proskauer knew of the subsequent fraud allegedly perpetrated against the Plaintiffs, which fraud was the subject of the 2013 Action. See National Westminister Bank v Weksel, 124 AD2d 144, 150 [1st Dept 1987] (while a law firm gains access to information in the course of representing a client, "the fact of legal representation, even as to transactions allegedly the subject of subsequent [fraud], does not itself support the inference of the high degree of scienter necessary to extend fraud liability [against the firm] on an aiding and abetting theory").

Plaintiffs' attempt to overcome this flaw by relying on Weinstein's recent motion, filed by his new counsel in the New Jersey federal court, seeking "specific performance" of his plea agreement made with the government in connection with the 2011 charges,[FN2] is also misplaced. Even if his argument in that motion were true (i.e., the fraud scheme in the 2011 and 2013 Actions was "a key component of both"), it does not give rise to an inference that Proskauer knew of the fraud concerning the Facebook IPO and other transactions implicated in the 2013 Action. For the same reason, the fact that the retainer fee was paid via a third-party check, with a notation that it was a "Loan Return for 148 LLC," does not infer that Proskauer "substantially assisted" Weinstein in defrauding Plaintiffs by laundering funds that were "probably directly or indirectly fraudulent proceeds" of the 2011 Action. The 2011 Action did not involve Plaintiffs, 148 or the Kahal Defendants. There is no allegation that Proskauer had "actual knowledge "(as opposed to Plaintiffs' speculative phrase "probably directly or indirectly") of any connection between Weinstein and Plaintiffs at the time the retainer was paid. This remains true even if Proskauer "knew" that Weinstein was prohibited from engaging in financial transactions of more than $1,000 or failed to perform sufficient "due diligence" as to the source of the funds.

Moreover, even though the intent to commit fraud may be divined from the surrounding circumstances, "substantial assistance" in aiding and abetting fraud "means more than just performing routine business services for the alleged fraudster." CRT Invs., Ltd. v BDO Seidman, LLP, 85 AD3d 470, 472 [1st Dept 2011] (citations omitted). Here, it is not alleged that Proskauer provided substantial assistance to Weinstein, other than routine legal representation in the 2011 Action, by making fraudulent misrepresentation or inducing Plaintiffs in connection with transactions implicated in the 2013 Action.

Further, when a plaintiff seeks to extend an alleged fraud beyond the principal actors, the requirement of CPLR 3016(b) must be "strictly adhered" to because "the alleged aider and abetter, by hypothesis, has not made any fraudulent misrepresentation and should not be called to account for the intentional tort of another unless the circumstances of his connection therewith can be alleged in detail from the outset." National Westminster, 124 AD2d at 149. The allegations against Proskauer do not meet CPLR 3016 (b)'s requirements. Plaintiffs' reliance on Eurycleia Partners, LP v Seward & Kissel, LLP (12 NY3d 553 [2009]) is also misplaced. Indeed, in Eurycleia, the Court of Appeals dismissed the aiding and abetting fraud claim against the law firm that prepared the [*5]offering memoranda for a hedge fund that later collapsed. The Court held that even though "a plaintiff need not produce absolute proof of fraud," the allegations in the amended complaint were "conclusory" and did not give rise to a "reasonable inference" that the law firm committed fraud or aided and abetted fraudulent activities. Id. 560-561. Here, the Complaint fails to allege that Proskauer knew and substantially assisted Weinstein in those transactions in which Plaintiffs assert they were defrauded. Thus, the aiding and abetting fraud claim shall be dismissed.

"

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Could the Attorney Have Done More?

Sometimes we read a decision and wonder how the case got to trial.  Cinao v Reers  2013 NY Slip Op 05791 [109 AD3d 781]  September 11, 2013  Appellate Division, Second Department is one such case.

"Here, the evidence supports the jury's finding that the defendant did not "depart[ ] from the exercise of that degree of care, skill, and diligence commonly possessed and exercised by a member of the legal community" (Edwards v Haas, Greenstein, Samson, Cohen & Gerstein, P.C., [*2]17 AD3d 517, 519 [2005]). The jury properly credited evidence which established, among other things, that the defendant marshaled the trust assets, communicated with the attorneys representing the plaintiff's brother in an attempt to settle the brothers' dispute over the trust, advised the plaintiff to retain local counsel in Hawaii, and successfully sought to adjourn the proceedings several times to give the plaintiff sufficient opportunity to retain local counsel. The plaintiff admitted that he made no attempt to retain local counsel to oppose his brother's petition to remove him as sole trustee. In addition, it is undisputed that when the plaintiff retained the defendant in April 2000, the plaintiff had already breached the terms of the trust which required him to distribute $158,000 to his brother within six months of their mother's death, and that prior to retaining the defendant, the plaintiff, as the sole trustee, had not taken any steps to administer the trust. Thus, the jury properly concluded that the plaintiff's inaction as sole trustee led to the untimely distributions, as well as his removal as sole trustee, and that the defendant did not depart from the exercise of that degree of care, skill, and diligence commonly possessed and exercised by a member of the legal community in attempting to resolve the brothers' dispute and administer the trust. Accordingly, contrary to the plaintiff's contention, the verdict was supported by a fair interpretation of the evidence (see Lolik v Big V Supermarkets, 86 NY2d at 746)."

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Settlements and Legal Malpractice

Potential clients often ask whether they should settle the underlying case and then sue their present attorney for legal malpractice, or sue before settling.  Aside from the "bird in the hand/bird in the bush" issue, and whether it is better to take something specific now, rather than waiting for the future potential, the rule in legal malpractice is that settlement of the underlying case is not necessarily the end of the legal malpractice case.

Angeles v Aronsky  2013 NY Slip Op 05955 [109 AD3d 720]  September 24, 2013
Appellate Division, First Department  is an example of the issue in the First Department.  There are similar cases in the Second Department, too.

Plaintiff Manuel Angeles commenced this legal malpractice and breach of contract action against defendant Jeffrey A. Aronsky alleging that defendant negligently represented plaintiff in his underlying premises liability action arising from an attack on plaintiff in the lobby of an apartment building. Plaintiff also asserts that defendant breached the retainer agreement.

On December 7, 2007, at approximately 3:15 p.m., plaintiff entered the front entrance of the apartment building where he lived and, immediately upon reaching the lobby, was hit in the jaw. Although there were no witnesses to the actual attack, a neighbor who was standing outside the building around the time of the incident saw three men run out the front entrance. Two of the men were holding baseball bats. The neighbor, who had lived in the building for about five years, did not recognize any of the men. Plaintiff also did not recognize the men, whom he observed briefly before he lost consciousness following the assault.

On the day of the incident, plaintiff admits that the door locked behind him when he left the building around 2:55 p.m. and that he had to unlock it with his key when he returned a short time later. On the side of the building there is a door to the laundry room, which is located in the basement. This door remains unlocked between 9:00 a.m. and 6:00 p.m. From the laundry room, a person can access the lobby without a key by using the elevator.

Shortly after the attack, plaintiff retained defendant to represent him in a potential personal injury case. According to defendant, an investigator from his office initially interviewed plaintiff at the hospital. Defendant asserts that he later spoke with plaintiff over the phone to review the information plaintiff had given the investigator. Plaintiff told defendant that the front door was locking properly on the day he received his injuries and mentioned no other entrances. Defendant accepted plaintiff's statements concerning the security of the building, and did not send an investigator to inspect the premises or visit the premises himself. Also, he did not interview the superintendent. [*2]

Although a settlement agreement was reached with the owner of the building prior to the commencement of any personal injury action, plaintiff commenced a legal malpractice action against defendant, alleging, inter alia, that he negligently investigated plaintiff's premises liability claim. Defendant moved for summary judgment dismissing plaintiff's complaint and the motion court denied the motion.

For a claim for legal malpractice to be successful, "a plaintiff must establish both that the defendant attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession which results in actual damages to a plaintiff and that the plaintiff would have succeeded on the merits of the underlying action 'but for' the attorney's negligence" (AmBase Corp. v Davis Polk & Wardwell, 8 NY3d 428, 434 [2007] [citation omitted]). A client is not barred from a legal malpractice action where there is a signed "settlement of the underlying action, if it is alleged that the settlement of the action was effectively compelled by the mistakes of counsel" (Garnett v Fox, Horan & Camerini, LLP, 82 AD3d 435, 435 [1st Dept 2011] [internal quotation marks omitted], quoting Bernstein v Oppenheim & Co., 160 AD2d 428, 430 [1st Dept 1990])."

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Conveying a Settlement Offer is Not Enough

In an interesting case to buck the "but for" dismissal trend in legal malpractice, Angeles v Aronsky  2013 NY Slip Op 05955 [109 AD3d 720]  September 24, 2013  Appellate Division, First Department points out that when viewed correctly, a summary judgment motion should be denied when there is any question of fact. 

"Plaintiff Manuel Angeles commenced this legal malpractice and breach of contract action against defendant Jeffrey A. Aronsky alleging that defendant negligently represented plaintiff in his underlying premises liability action arising from an attack on plaintiff in the lobby of an apartment building. Plaintiff also asserts that defendant breached the retainer agreement.

On December 7, 2007, at approximately 3:15 p.m., plaintiff entered the front entrance of the apartment building where he lived and, immediately upon reaching the lobby, was hit in the jaw. Although there were no witnesses to the actual attack, a neighbor who was standing outside the building around the time of the incident saw three men run out the front entrance. Two of the men were holding baseball bats. The neighbor, who had lived in the building for about five years, did not recognize any of the men. Plaintiff also did not recognize the men, whom he observed briefly before he lost consciousness following the assault.

On the day of the incident, plaintiff admits that the door locked behind him when he left the building around 2:55 p.m. and that he had to unlock it with his key when he returned a short time later. On the side of the building there is a door to the laundry room, which is located in the basement. This door remains unlocked between 9:00 a.m. and 6:00 p.m. From the laundry room, a person can access the lobby without a key by using the elevator.

Shortly after the attack, plaintiff retained defendant to represent him in a potential personal injury case. According to defendant, an investigator from his office initially interviewed plaintiff at the hospital. Defendant asserts that he later spoke with plaintiff over the phone to review the information plaintiff had given the investigator. Plaintiff told defendant that the front door was locking properly on the day he received his injuries and mentioned no other entrances. Defendant accepted plaintiff's statements concerning the security of the building, and did not send an investigator to inspect the premises or visit the premises himself. Also, he did not interview the superintendent. [*2]

Although a settlement agreement was reached with the owner of the building prior to the commencement of any personal injury action, plaintiff commenced a legal malpractice action against defendant, alleging, inter alia, that he negligently investigated plaintiff's premises liability claim. Defendant moved for summary judgment dismissing plaintiff's complaint and the motion court denied the motion."

"In this specific case, given plaintiff's lack of sophistication and his limited education, defendant's statement that he never conducted any investigation, except for speaking to plaintiff for a very limited time, raises a question of fact as to whether defendant adequately informed himself about the facts of the case before he conveyed the settlement offer. Furthermore, defendant says he told plaintiff, when he conveyed the settlement offer, that it was a "difficult liability case." It is difficult to understand, on the record before us, how he made that assessment without going to the building, or speaking to the superintendent. Because the evidence on a defendant's summary judgment motion must be viewed in the light most favorable to plaintiff (Branham v Loews Orpheum Cinemas, Inc., 8 NY3d 931 [2007]), we find there are questions of fact as to whether the attorney failed to exercise the ordinary reasonable skill appropriate under the circumstances."

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A Tragedy, A Trial, A Transfer

Plaintiff's child fell from a window. The window was in a multiple dwelling and there was no window guard.  The building had no insurance, and the owner eventually took off.  Was there legal malpractice in Plaintiff's attorney failing to file a lis pendens or to seek pre-judgment attachment?

The short answer is no, which illustrates the "but for" (and the hardest) portion of legal malpractice.

In Noel v Feinberg  2014 NY Slip Op 32230(U)  August 15, 2014  Supreme Court, Kings County
Docket Number: 502465/12  Judge: David I. Schmidt discusses when pre-judgment attachment may be permitted, and when a lis pendens may be filed. 

"Plaintiff commenced this action seeking to recover damages for the alleged
malpractice committed by defendants in the Personal Injury Action. Therein, plaintiffs sought to recover damages for injuries sustained by the infant plaintiff on July 12, 1997 when
he fell out of a window that did not have proper and/or adequate window guards.

In support of the motion, defendants argue that their representation of plaintiffs in the Personal Injury Action did not fall below the applicable standard of care and that their alleged actions and/or inactions are not the proximate cause of plaintiffs alleged damages. More specifically, defendants argue that a pre-judgment attachment and lis pendens were not available in the Personal Injury Action. Defendants also contend that plaintiff fails to plead that but for defendants' conduct in not seeking these provisional remedies, they would have been able to enforce the judgment obtained, so that they fail to establish that the alleged malpractice was the proximate cause of their alleged damages. Further, defendants contend that plaintiffs action is premature in that he has yet to
sustain any actual or ascertainable damages, since he is free to pursue the true tortfeasor, Mr.
George. In this regard, defendants allege that pursuant to CPLR 211 (b ), there is a 20-year statue of limitations to enforce the judgment. Accordingly, this statue of limitations will not expire until at least March 7, 2020. In addition, plaintiff can still pursue a claim for fraudulent conveyance against Mr. Meisels, since pursuant to CPLR 208, the statue of limitations on that claim is three years after the infant plaintiffs birthday, or July 5, 2014. Finally, defendants argue that they exercised ordinary and reasonable care in representing plaintiff in the Personal Injury Action.

Defendants also explain that during the pre-trial phase of that action, they and the Weicholz Firm expressed concern to the court regarding the lack of liability insurance and insolvency of Mr. George at a pre-trial conference held on November 1, 1999, when they made an oral application to the court for an order of attachment. That application was denied, but Mr. George was ordered to provide an affidavit listing his assets. In his affidavit, dated December 13, 1999, Mr. George stated that he owned three properties valued at $4 76,000, although he held a combined equity of only $176,830.

Pursuant to CPLR 6201(3), the only provision that could be applicable to the facts now before the court:
"An order of attachment may be granted in any
action . . . where the plaintiff has demanded and would be
entitled, in whole or in part, or in the alternative, to a money
judgment against one or more defendants, when:
"[T]he defendant, with intent to defraud his creditors or
frustrate the enforcement of a judgment that might be rendered
in plaintiffs favor, has assigned, disposed of, encumbered or
secreted property, or removed it from the state or is about to do
any of these acts."
 (see generally Crescentini v Slate Hill Biomass Energy, LLC, 113 AD3d 806 [2014]; Corsi v Vroman, 37 AD3d 397 [2007]). '"Furthermore, the mere removal, assignment or other disposition of property is not grounds for attachment"' (Corsi, 37 AD3d at 397, quoting Computer Strategies v Commodore Bus. Machs., 105 AD2d 167, 173 [1984]; accord Mitchell v Fidelity Borrowing LLC, 34 AD3d 366, 366-367 [2006]).

CPLR 6501 provides, in relevant part, that"[ a] notice of pendency may be filed in any action in a court of the state or of the United States in which the judgment demanded would affect the title to, or the possession, use or enjoyment of, real property."

"[B]ecause of 'the powerful impact that this device has on the
alienability of property,' together with 'the facility with which
it may be obtained,' the courts have applied a narrow
interpretation in reviewing whether an action is one affecting the
title to, or the possession, use or enjoyment of, real property."
(Shkolnik v Krutoy, 32 AD3d 536, 537 [2006], quoting 5303 Realty Corp. v 0 & Y Equity
Corp., 64 NY2d 313, 315-316, 321 [1984]).

Thus, it is well settled that "[a] notice of pendency is not available where a plaintiff claims no right, title or interest in the property itself' (Long Island City Sav. & Loan Assa. v Gottlieb, 90 AD2d 766 [ 1982], mod on other grounds 58 NY2d 931 [1983]; see also Khanal v Sheldon, 55 AD3d 684, 686 [2008], lv denied 12 NY3d 714 [2009] [notice ofpendency should be cancelled where plaintiff asserted only a claim for money, not a right, title, or interest in the property itself]). "

 

 

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Multiple Suits were Counterproductive

Plaintiff is sued in Civil Court for attorney fees.  She counterclaims for legal malpractice.  She then goes on to sue in Supreme Court for legal malpractice where her complaint is dismissed.  What happens to the Civil Court case?

Law Offs. of D'Amico & Assoc., PLLC v D'Elia  2014 NY Slip Op 51242(U)  Decided on July 28, 2014  Appellate Term, Second Department tells us that the multiple suit concept merely allows extra opportunities for the case to be dismissed.

"Prior to the return date of the firm's motion to dismiss Ms. D'Elia's counterclaims in the District Court action, that court was advised of the Supreme Court's decision. By order dated October 20, 2009, the District Court dismissed her counterclaims, on res judicata grounds, pursuant to CPLR 3211 (a) (5), based on a finding that the counterclaims were identical to the claims for legal malpractice she had asserted against the firm in the Supreme Court action. By decision and order dated April 26, 2011 (32 Misc 3d 28), this court reversed the District Court's order and remitted the matter to the District Court for a new determination of the firm's motion to dismiss the counterclaims pursuant to CPLR 3211 (a) (1) and (7), without prejudice to the firm's seeking dismissal of the counterclaims on the ground of res judicata, pursuant to CPLR 3211 (a) (5), upon proper notice to Ms. D'Elia.

In May 2011, the firm moved, in the District Court, to dismiss Ms. D'Elia's counterclaims on res judicata grounds, pursuant to CPLR 3211 (a) (5), and also sought a determination on its prior motion to dismiss the counterclaims pursuant to CPLR 3211 (a) (1) and (7). The firm noted that, by order dated March 3, 2010 (2010 NY Slip Op 30545[U]), the Supreme Court (Edward W. McCarty, III, J.), upon granting the branch of Ms. D'Elia's motion seeking, in effect, to vacate her default in opposing the firm's prior motion to dismiss her complaint, dismissed Ms. D'Elia's complaint insofar as asserted against the firm, based upon documentary evidence. Although Ms. D'Elia had filed a notice of appeal from that order, her appeal was ultimately dismissed by the Appellate Division, Second Department, in April 2011, due to her failure to perfect. Ms. D'Elia opposed the firm's motion.

By order dated January 5, 2012, the District Court, upon reviewing the two Supreme Court orders, denied the firm's motion to dismiss Ms. D'Elia's counterclaims on res judicata grounds, pursuant to CPLR 3211 (a) (5). The District Court further denied the firm's original motion to dismiss pursuant to CPLR 3211 (a) (1) and (7). Thereafter, the firm moved for, among other things, leave to renew and reargue its prior motions. The motion was unopposed. By order dated March 16, 2012, the District Court granted renewal and reargument, and adhered to its original determination.

 

The doctrine of res judicata is designed to put an end to a matter once it is duly decided (see Siegel, NY Prac § 442, at 772 [5th ed]). Res judicata "generally dictates that a valid final determination on the merits bars a future action between the same parties on the same cause of action" (Troy v Goord, 300 AD2d 1086, 1087 [2002]) and is invoked when a party, or those in privity with the party, seek to relitigate a disposition on the merits of claims or causes of action arising out of the same transaction or series of transactions which were raised or could have been raised in the prior litigation (see Matter of Hunter, 4 NY3d 260, 269 [2005]; Schuylkill Fuel Corp. v Nieberg Realty Corp., 250 NY 304, 306-307 [1929]). Typically, "once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or if seeking a different remedy" (O'Brien v City of Syracuse, 54 NY2d 353, 357 [1981]). "The rationale underlying this principle is that a party who has been given a full and fair opportunity to litigate a claim should not be allowed to do so again" (Matter of Hunter, 4 NY3d at 269).

In its January 5, 2012 order, the District Court stated that Ms. D'Elia's complaint in the Supreme Court action "included claims of legal malpractice which are essentially identical to Ms. D'Elia's counterclaims in this action" (emphasis added). The District Court, however, denied the firm's motion to dismiss Ms. D'Elia's counterclaims pursuant to CPLR 3211 (a) (5), notwithstanding the fact that the Supreme Court, in both its September 15, 2009 order and its [*3]March 3, 2010 order, stated that dismissal of the complaint insofar as asserted against the firm was warranted pursuant to CPLR 3211 (a) (1), based upon the documentary evidence submitted by the firm, which conclusively established the firm's defenses to plaintiff's claims.

In view of the foregoing, the District Court erred in not giving res judicata effect to the Supreme Court's dismissal of Ms. D'Elia's complaint insofar as asserted against the firm, and should have granted plaintiff's motion to dismiss Ms. D'Elia's counterclaims on that ground.

Accordingly, the District Court's March 16, 2012 order, insofar as appealed from, is modified by providing that, upon renewal and reargument, plaintiff's motion to dismiss defendant's counterclaims on res judicata grounds, pursuant to CPLR 3211 (a) (5), is granted, and plaintiff's motion to dismiss defendant's counterclaims pursuant to CPLR 3211 (a) (1) and (7) is denied as academic."

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When Is An Expert Good Enough?

For summary judgment purposes, an expert is an expert and is good enough .  No?  In legal malpractice, an attorney, duly licensed, is good enough to comment on the work of another attorney?  No?

Not for Judge Buggs.  In  Gonzalez v Flushing Hosp. Med. Ctr2014 NY Slip Op 51226(U)
Decided on August 12, 2014 Civil Court Of The City Of New York, Queens County. Judge Buggs writes:

"To support her argument of legal malpractice, Gonzalez offered the affirmation of attorney Stephen Paul Haber ("Haber"), who opined that B & H's representation of Bey deviated from the standards in the practice of law in that: 1) B & H failed in its obligation to inquire of Bey about his insurance coverage, and to inform any insurance carriers with whom he had coverage about his large financial exposure to liability, and that 2) its representation of both Bey and Cha was a conflict of interest; (Gonzalez' Exhibit E; Affidavit of Stephen Paul Haber).

Before addressing the merits of Haber's affirmation, it must be noted that while the Court accepts that Haber is, as his affirmation states, "an attorney duly licensed to practice in the State of New York" (Gonzalez' Exhibit E, Paragraph 1), his expertise and qualifications to render opinions regarding legal malpractice actions and/or the professional standards for attorneys handling legal matters involving insurance coverage issues for medical malpractice cases is unclear. While Gonzalez' attorney, in his Affirmation in Opposition, speaks to Haber having "over 30 years of extensive experience in representing healthcare providers in the defense of medical malpractice actions," Haber's affirmation itself is silent about his qualifications. He fails to state how long he has practiced, and in what area of law. Movant, in its Reply Memorandum of Law, correctly cites case law requiring that an expert can be deemed qualified to render an opinion if "...he or she is possessed of the requisite skill, training, education, knowledge or experience from which it can be assumed that the information imparted or the opinion is reliable'" (Lopez v Gem Gravure Co., Inc., 50 AD3d 1102 at 1103 [2d Dept 2008]). Considering this standard, there is insufficient indication that Haber qualifies as an expert for the issues in contention herein.

However, solely for the sake of exploring the merits of Haber's affirmation, the Court will assume that Haber is the experienced attorney Gonzalez' counsel says he is, and not some "newbie" attorney randomly snatched from the halls of a local Appellate Division judicial department after having just been sworn in."

"Accordingly, not only is Gonzalez' expert affirmation lacking for failure to establish the expert's credentials, but even upon fully considering the merits of his contentions, he fails to demonstrate a factual issue requiring a trial on legal malpractice. There is insufficient showing of a duty owed by B & H to Bey on the issue of insurance coverage, and even assuming the existence of such a duty, no establishment of proximate cause. Haber's contention that B & H violated ethical rules in representing two physicians with conflicting interests is likewise unsupported with an establishment of a "but for" connection to Bey's damages."

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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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