In big financial transactions, big law firm 1 may often interact with big law firm 2 in the generation of loan documents, opinion letters and the such.  Their interaction, viz-a-viz the clients (on both sides) may yield significant risk the law firms.

Bloostein v Morrison Cohen LLP  2017 NY Slip Op 30833(U)  April 21, 2017  Supreme Court, New York County  Docket Number: 651242/2012  Judge: Anil C. Singh is an example.  We discussed this case last year, several times but now the third-party motion practice seems to have come to an end.

“Plaintiffs in the main action (the “plaintiff investors”) allegedly engaged Morrison Cohen as attorneys to represent them in connection with a reinvestment transaction (the “Transaction”) designed by former third-party defendant Stonebridge Capital (“Stonebridge”). The advice rendered by Morrison Cohen to the investors form the basis for the main action. In the Second Amended Third-Party Complaint (“Third-party Complaint”), Morrison Cohen alleges that Stonebridge retained two law firms to represent their interests in the Transaction, including Brown Rudnick. The terms of Stonebridge’s retention of Brown Rudnick are set forth in the March 16, 2006 Stone bridge/ Brown Rudnick engagement letter (“Engagement Letter”). The Third-party Complaint further alleges that Brown Rudnick was the primary drafter of the documents that comprised the Transaction (the “Transaction Documents”). In addition to drafting the Transaction Documents, Brown Rudnick is also alleged to have issued a tax opinion letter to the plaintiff investors (the “Opinion Letter”). ”

“On or about January 9, 2015, Morrison Cohen commenced the third-party action against Stonebridge and Brown Rudnick. The Third-party Complaint interposes three causes of action: (1) indemnification and contribution as against Stonebridge (“First Cause of Action~’) (2) indemnification and contribution as against Brown Rudnick arising from the Opinion Letter (“Second Cause of Action”); and (3) indemnification and contribution as against Brown Rudnick concerning the Transaction Documents (“Third Cause of Action”). Stonebridge and Brown Rudnick, by their respective counsel, filed motions to dismiss the Third-party Complaint. By Order dated July 11, 2016, this Court granted Stonebridge’s motion to dismiss. Brown Rudnick’s motion to dismiss was granted as to indemnification, and denied as to contribution. Brown Rudnick brings this motion pursuant to CPLR §2221 seeking clarification of the Order. Brown Rudnick states that the contribution claim brought against it by Morrison Cohen concerned both the Opinion Letter and the Transaction Documents. The Order denied dismissal of the claim for contribution as to the Opinion Letter but did not explicitly address the Transaction Documents. ”

“The Court of Appeals has held that an intended third-party beneficiary relationship will be found where the following elements are met: ( 1) the existence of a valid and binding contract between other parties, (2) that the contract was intended for the benefit of the third-party; and (3) that the benefit to the third-party is sufficiently immediate, rather than incidental, to indicate the assumption by the contracting parties of a duty to compensate the third-party if the benefit is lost.” State of California Public Employees’ Retirement System v. Shearman & Sterling, 95 N.Y.2d 427, 434-35 (2000). The Court of Appeals has adopted the reasoning of the Restatement (Second) of Contracts as to the determination of an intended beneficiary. Fourth Ocean Putnam Corp. v. Interstate Wrecking Co., Inc., 66 N.Y.2d 38, 44 (1985) (quoting the Restatement). The Restatement states that:

“a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either (a) … 1 ; or (b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.”

Restatement (Second) of Contracts§ 302 (1981).

Here, Morrison Cohen has not pied any facts to show that Brown Rudnick and Stonebridge intended their Engagement Letter to be for the benefit of the plaintiff investors. The Engagement Letter itself states that, “[Unless] we expressly agree to provide additional services, our engagement is to represent solely Stonebridge Funding, LLC in connection with the specific matter set forth above.” Morrison Cohen’s contention that the preceding sentence proves otherwise is unavailing. Thepreceding sentence provides that Brown Rudnick was willing to have discussions about the representation of a party other than Stonebridge but it does not suggest that the Engagement Letter covered a third-party. Moreover, the circumstances surrounding the Transaction and the drafting of the Transaction Documents do not support Morrison Cohen’s argument that the benefit to the plaintiff investors was sufficiently immediate, rather than incidental. The contracts between the parties in this action are a result of sophisticated parties making arms-length decisions. The plaintiff investors contracted with Morrison Cohen for legal services. Stonebridge contracted with Brown Rudnick for legal services. The plaintiff investors and Brown Rudnick did not contract and there is no indication that they intended to rely on each other’s performance. There is nothing in the Engagement Letter which suggests an intent to benefit the plaintiff investors. Therefore, Morrison Cohen has failed to plead that Brown Rudnick owed the plaintiff investors a duty in preparation of the Transaction Documents. ”

 

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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.