Attorney is retained by plaintiff to prepare a commercial and corporate agreement between plaintiff and a commercial suitor. In the end, plaintiff claims, attorney took a look at plaintiff’s niche business, then formed its own spin-off company to compete. Competition rose to the $ 2.5 billion level. Justice Feinman rendered a decision in Sharbat v Law Offs. of Michael B. Wolk, P.C.; 2011 NY Slip Op 30088(U) ;Sup Ct, New York County; Docket Number: 600151/2008
Judge: Paul G. Feinman which interprets and re-states some well known principals of legal malpractice and breach of fiduciary duty. Here’s some background:

"Sharbat is the president and sole equity holder of QSM. According to Sharbat, QSM is engaged in the business of “buying and re-selling certain qualified individual life insurance policies in the premium finance/life settlement arena – a niche industry.”

"Specifically, plaintiffs allege that, while defendants were acting as counsel for plaintiffs defendants were exposed to plaintiffs’ “business, business model, client base, stratagem for making profits, making contacts and recruiting clients.”

"As a result of defendants’ exposure to plaintiffs’ business and business contacts, plaintiffs
allege that defendants started a company called Lifespring Brokerage, LLC (Lifespring)).
Michael Morrisan (Modson), one of the founders of Lifespring, was working as an attorney for
that Wolk Firm during its representation of plaintiffs"

"Plaintiffs contend that defendants breached their fiduciary duty when they solicited plaintiff’s’ clients, misappropriated and utilized plaintiffs’ client lists without plaintiffs’ knowledge or consent, and unfairly competed with plaintiffs by starting an identical competing business. With respect to Ehrlich, as previously mentioned, defendants drafted a contract between plaintiffs and Ehrlich. Sometime after the attorney-client relationship was over, plaintiffs discovered that defendants were pursuing business with Ehrlich. Defendants do not deny contacting Ehrlich and pursuing business with him. Defendants merely state that plaintiffs have failed to establish that they had an exclusive right to conduct business with Ehrlich. Defendants summarily state that they did not receive a “penny” from Ehrlich. Defendants do not, however, deny that Lifespring received a profit from Ehrlich. Defendants also maintain that Ehrlich made his own independent decision not to conduct business with plaintiffs. As such, according to defendants, any conduct which may have harmed plaintiffs was the conduct on the part of Ehrlich not to conduct business with plaintiffs, not defendants’ conduct in pursuing business with him. With respect to Oceangate, Sharbat testified that 0Oceangate assured plaintiffs that it would give plaintiffs exclusive business. However, when plaintiffs followed up, Oceangate stated that It had decided to give its exclusive business to Lifespring.

In response, defendants make the same arguments, Le., that they never received a penny from any transactions with Oceangate, Oceangate chose not to conduct business with plaintiffs, and Oceangate was not plaintiffs’ exclusive client. Defendants do not deny pursuing business with Oceangate, nor do they deny that Lifespring received a profit from Oceangate."

"As set forth blow, the record indicates that not only have defendants not met their burden on a motion for summary judgment, but that plaintiff’s have created a triable issue of fact as to whether defendants’ professional judgment was impaired due to defendants alleged divided
loyalties, Factual issues remain with respect to Ehrlich, Oceangate, the client lists, and the use of
plaintiffs’ business models, and a potential breach of fiduciary duty."