Harris Beach PLLC v Eber Bros. Wine & Liq. Corp. 2014 NYSlipOp 06704 [121 AD3d 1524]
October 3, 2014 Appellate Division, Fourth Department is an interesting case in which the Third Department briskly reversed the order of Supreme Court. Harris Beach is a large powerful upstate law firm, and it sued for close to $1 Million in fees. Supreme Court granted Harris Beach partial summary judgment, but the Third Department saw things differently. It held that plaintiff law firm failed to demonstrated that it did no wrong, hence, partial summary judgment was inappropriate.
“It is hereby ordered that the order so appealed from is unanimously reversed on the law without costs and the motion is denied in accordance with the following memorandum: Plaintiff, the longtime general counsel for defendant, commenced this action seeking to recover approximately $750,000 in costs, disbursements, legal fees, and interest thereon for services rendered to defendant in the defense of a tort and breach of contract action in which defendant had been sued (underlying action). The underlying action was commenced on October 5, 2006, and, at that time, defendant was insured by Illinois National Insurance Company (Illinois National) pursuant to a policy of directors, officers and private company liability insurance (Illinois National policy) effective for the period from March 31, 2006 to March 31, 2007. The coverage under the Illinois National policy was limited to claims made and reported during the period in which that policy was effective, as was the coverage afforded defendant under a policy of directors, officers, and private company liability insurance issued by National Union Fire Insurance Company of Pittsburgh, Pa. (National Union) for the period from March 31, 2008 to March 31, 2009 (National Union policy). On August 7, 2008, i.e., approximately two years after the commencement of the underlying action, plaintiff wrote to M&T Insurance Agency, from which defendant had obtained the National Union policy, and, inter alia, tendered the defense of defendant in the underlying action pursuant to what the record reflects was the National Union policy. Both Illinois National and National Union are part of the AIG group of insurers, and by letter dated September 24, 2008, a claims analyst employed by AIG Domestic Claims, Inc. rejected plaintiff’s tender on the ground that it was untimely.”
“In its answer, defendant denied that it “failed to pay any legal bills justly due to [plaintiff].” Defendant also asserted 10 affirmative defenses, only two of which are relevant on appeal. In the fifth affirmative defense defendant alleged that plaintiff’s claims are barred by the doctrine of unclean hands, and in the sixth affirmative defense defendant alleged that any recovery by plaintiff must be reduced by sums presently owing or found to be owed to defendant arising from plaintiff’s professional negligence and breach of fiduciary duty. Defendant also asserted two counterclaims, including a counterclaim for professional negligence alleging, in relevant part, that plaintiff was negligent in failing to provide defendant’s insurer with timely notice of the claim that was the underlying action. Defendant alleged that, had plaintiff given timely notice of the claim, coverage for defendant in that matter would not have been denied and, “[defendant’s] insurer would have advanced the very defense costs that [plaintiff] now seeks to recover from [defendant].” Plaintiff thereafter moved for partial summary judgment dismissing the subject affirmative defenses as well as the subject counterclaim insofar as it is based on the alleged late reporting of the underlying action. Supreme Court granted the motion, and we reverse.
In order to establish legal malpractice by plaintiff, defendant “ ’must demonstrate that [plaintiff] failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession’ and that [plaintiff’s] breach of this duty proximately caused [defendant] to sustain actual and ascertainable damages . . . To establish causation, [defendant] must show that [it] would have prevailed in the underlying action or would not have incurred any damages, but for [plaintiff’s] negligence” (Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442 [2007]; see Utica Cutlery Co. v Hiscock & Barclay, LLP, 109 AD3d 1161, 1161 [2013]). In the context of this motion by plaintiff for partial summary judgment, the burden was on plaintiff to present “evidence . . . in admissible form establishing that [defendant] is unable to prove at least one of [the] essential elements of a malpractice cause of action” (Ippolito v McCormack, Damiani, Lowe & Mellon, 265 AD2d 303, 303 [1999]; see Compis Servs., Inc. v Greenman, 15 AD3d 855, 855 [2005], lv denied 4 NY3d 709 [2005]). More specifically, plaintiff was required to establish in this case that, even if plaintiff had timely tendered defendant’s defense in the underlying action, defendant’s insurer would nothave furnished defense dollars in the underlying action, and thus that defendant could not have been harmed by plaintiff’s untimely notice of the underlying action. We conclude that plaintiff failed to do so and that the court therefore erred in granting the motion.”