While theft by an attorney may be many things, it is questionable whether it might be called legal malpractice.  In B & R Consol., L.L.C. v Zurich Am. Ins. Co. 2011 NY Slip Op 51142(U) ; Decided on June 22, 2011 ; Supreme Court, Nassau County ; DeStefano, J. we see an upside-down mirror image of the usual legal malpractice case.  Here plaintiff’s attorneys are well known legal malpractice defense counsel, plaintiff in the underlying legal malpractice case is suing the malpractice insurer, and the argument is over whether the insurance policy covers the alleged acts.  Here, for the moment it does.
 

"In an action filed on November 6, 2008, encaptioned B & R Consolidated, L.L.C. v Frederic A. Powell, Esq. and Robin Powell, Index No. 020049/08 (the "underlying action"), B & R asserted, inter alia, causes of action in fraud, unjust enrichment, conversion, breach of contract, and breach of fiduciary duty based upon an admission by attorney Frederick A. Powell ("Powell") that he "stole four hundred and fifty thousand ($450,000.00) dollars of B & R’s money from his escrow account for other personal projects’" and did this "without any authorization from B & R" (Ex. "1" to Plaintiff’s Opposition). Specifically, it was alleged in the complaint that:

Unbeknownst to B & R, [Powell] received the money from the repayment of a mortgage owned by B & R in June of 2007. [Powell] neglected to inform B & R that the money had been received until September 2008, more than an entire year later! Instead, [Powell] made periodic payments to B & R under the guise of interest payments being made by a third party on the mortgage held by B & R

Accordingly, the Court finds unrebutted plaintiff’s proof that Powell took possession of funds belonging to the plaintiff, hid that fact from it, and then lost or misappropriated those funds for his own use. This constitutes an established breach of fiduciary duty owed to B & R by Powell as its attorney. Further, damages resulting from that breach have been shown as a result of the [*4]misappropriation of the clients’ funds, which is distinct from any claim for negligence or legal malpractice. Summary judgment therefore is granted to the plaintiff on its third and fifth causes of action, breach of "the fiduciary duty of care", and "of loyalty", as they most closely comport with the foregoing authority regarding breach of fiduciary duty generally. The Court notes that such a breach would also allow for a recovery for any attorney’s fees that were improperly charged as being incident the to [sic] breach rendering the continued pursuit of the negligence and malpractice causes of action unnecessary. Summary judgment is therefore denied as to these claims. "

"The Insurer argues that liability in the underlying action was not based upon Powell’s rendition of legal services but, rather, on his misappropriation of B & R’s funds and, thus, the Insurer has no obligation to indemnify. In the underlying action, Justice Palmieri stated in his decision that "the amended complaint is framed in terms of negligence, malpractice, and breach of fiduciary duty to Powell. This in turn is premised on bad advice from Powell as attorney and a failure to keep B & R informed of the true status of its loan to Lyons" (Ex. "7" to Plaintiff’s Opposition at p. 5). 

Under the circumstances, and considering that the causes of action asserting breach of fiduciary duty are based upon the same facts constituting the causes of action alleging negligence and legal malpractice, it cannot be said as a matter of law that Powell’s conduct falls outside the scope of risk covered by the policy (Ex. "7" to Plaintiff’s Opposition at p 8; see Ulico Casualty Co., v Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d 1 [1st Dept 2008]; Burkhart, Wexler & Hirschberg, LLP v Liberty Insurance Underwriters, Inc., 60 AD3d 884 [2d Dept 2009]).[FN3] "

 

 

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Andrew Lavoott Bluestone

Andrew Lavoott Bluestone has been an attorney for 40 years, with a career that spans criminal prosecution, civil litigation and appellate litigation. Mr. Bluestone became an Assistant District Attorney in Kings County in 1978, entered private practice in 1984 and in 1989 opened…

Andrew Lavoott Bluestone has been an attorney for 40 years, with a career that spans criminal prosecution, civil litigation and appellate litigation. Mr. Bluestone became an Assistant District Attorney in Kings County in 1978, entered private practice in 1984 and in 1989 opened his private law office and took his first legal malpractice case.

Since 1989, Bluestone has become a leader in the New York Plaintiff’s Legal Malpractice bar, handling a wide array of plaintiff’s legal malpractice cases arising from catastrophic personal injury, contracts, patents, commercial litigation, securities, matrimonial and custody issues, medical malpractice, insurance, product liability, real estate, landlord-tenant, foreclosures and has defended attorneys in a limited number of legal malpractice cases.

Bluestone also took an academic role in field, publishing the New York Attorney Malpractice Report from 2002-2004.  He started the “New York Attorney Malpractice Blog” in 2004, where he has published more than 4500 entries.

Mr. Bluestone has written 38 scholarly peer-reviewed articles concerning legal malpractice, many in the Outside Counsel column of the New York Law Journal. He has appeared as an Expert witness in multiple legal malpractice litigations.

Mr. Bluestone is an adjunct professor of law at St. John’s University College of Law, teaching Legal Malpractice.  Mr. Bluestone has argued legal malpractice cases in the Second Circuit, in the New York State Court of Appeals, each of the four New York Appellate Divisions, in all four of  the U.S. District Courts of New York and in Supreme Courts all over the state.  He has also been admitted pro haec vice in the states of Connecticut, New Jersey and Florida and was formally admitted to the US District Court of Connecticut and to its Bankruptcy Court all for legal malpractice matters. He has been retained by U.S. Trustees in legal malpractice cases from Bankruptcy Courts, and has represented municipalities, insurance companies, hedge funds, communications companies and international manufacturing firms. Mr. Bluestone regularly lectures in CLEs on legal malpractice.

Based upon his professional experience Bluestone was named a Diplomate and was Board Certified by the American Board of Professional Liability Attorneys in 2008 in Legal Malpractice. He remains Board Certified.  He was admitted to The Best Lawyers in America from 2012-2019.  He has been featured in Who’s Who in Law since 1993.

In the last years, Mr. Bluestone has been featured for two particularly noteworthy legal malpractice cases.  The first was a settlement of an $11.9 million dollar default legal malpractice case of Yeo v. Kasowitz, Benson, Torres & Friedman which was reported in the NYLJ on August 15, 2016. Most recently, Mr. Bluestone obtained a rare plaintiff’s verdict in a legal malpractice case on behalf of the City of White Plains v. Joseph Maria, reported in the NYLJ on February 14, 2017. It was the sole legal malpractice jury verdict in the State of New York for 2017.

Bluestone has been at the forefront of the development of legal malpractice principles and has contributed case law decisions, writing and lecturing which have been recognized by his peers.  He is regularly mentioned in academic writing, and his past cases are often cited in current legal malpractice decisions. He is recognized for his ample writings on Judiciary Law § 487, a 850 year old statute deriving from England which relates to attorney deceit.