A Primer on All Aspects of Legal Malpractice

For a well written decision on one of the most complicated factual settings we can remember, read Oikonomos, Inc. v Bahrenberg   2013 NY Slip Op 50017(U)   Decided on January 5, 2013   Supreme Court, Suffolk County   Pines, J.   This legal malpractice-breach of fiduciary duty-breach of contract-fraud-promissory estoppel- equitable estoppel case has even more to it.  The facts of a vastly intertwined series of commercial / loan / guarantee / lease issues are so opaque that there is little sense to trying to describe it.  Justice Pines does a much better job in her decision,
 

"Applying these general principles to the case at bar, the Court finds that there are so many disputed issues of fact surrounding the legal malpractice claim of the Plaintiffs against Bahrenburg, that a trial is necessary. While Bahrenburg asserts he either did not represent or was released from any conflicts by certain Plaintiffs, the Plaintiffs state the opposite. While Bahrenburg offers different reasons for the Plaintiff's economic losses, the Plaintiffs set forth that each and every breach, whether of a lease, promissory note or guarantee, was caused by Bahrenburg's disloyalty, misrepresentations and improper acts. There are also issues of fact raised by the Third Party Defendants, the Braysons, with regard to the allegations that Bahrenburg's actions of collusion and malicious behavior are sufficient to permit them to sue Bahrenburg both as former clients and as third parties to the various transactions, for legal malpractice under the authority set forth above.

In this action, based upon a careful reading of all the papers, the Court is convinced that the allegations in this case of breach of fiduciary duty against Defendant Bahrenburg, while extremely serious , are subsumed under the claims for legal malpractice as they all arise from the same sets of alleged facts and actions. For this reason, although the Court believes that the multitude of claims by the various Plaintiffs against Bahrenburg for breach of his fiduciary duties will be the subject of much of the trial of this action, they are not the basis for a separate cause of action. Accordingly, the motions for Summary Judgment dismissing the twenty seventh claim by the corporate Plaintiffs and the third , fourth, and ninth cross claims by the Braysons against Bahrenburg for legal malpractice are denied. The motion for Summary Judgment, dismissing the fourth and seventeenth claims as well as the first and eighth cross claims against Bahrenburg for breach of fiduciary duties is granted, with the understanding that all of the factual allegations made under such claims may be presented as the basis for legal malpractice.

As with the breach of fiduciary duty claims, the Plaintiffs and third party Cross Claimants have set forth allegations of facts, which if demonstrated at trial, constitute fraud. However, to the extent that such allegations are made against Bahrenburg, they are again, subsumed within the legal malpractice claims and indeed seek the same damages for the loss of the lease, note and guarantee payments on the various underlying agreements that give rise to this lawsuit. Therefore, while Plaintiffs will be free to demonstrate the acts complained of, they are again not separate causes of action. The same is not true with regard to Defendants Clark and Dryfoos, who are essentially accused, through the various affidavits and discovery presented to the Court, of aiding and abetting Bahrenburg in his various alleged concealments, disloyalties to his former clients, and wrongful acts in jeopardizing their contractual rights. Accordingly, the Summary Judgment motions to dismiss the fraud claims against Bahrenburg (fifth, eighteenth and thirtieth) are granted. On the other hand, the allegations set forth by Plaintiffs against Clark and Dryfoos are sufficient to allow the twenty first and thirtieth claims against them, in which they are accused essentially of aiding and abetting Bahrenburg in acts of misrepresentation and concealment, to proceed to trial and are not dismissed on the Summary Judgment motion.

 

There are numerous contracts at issue in this case, which the Defendants all claim to be barred and the Plaintiffs all assert are enforceable. In this Court's view each presents ambiguities, when viewing the agreements as a whole, as well their purpose when entered (which is disputed in certain instances). Whether discussing the Oikonomos restructuring agreement, which the Defendants claim void based upon the advice of a non party and Plaintiff claims valid based upon the alleged advice of Windwood and Bahrenburg; the Stonegate lease amendment, which the Foundation asserts relieved it of its obligations and which Stonegate sets forth stands in view of obligations to the initial lending institution; the lease and services agreements between 3390, Educare and Windwood; or the guarantees of the Foundation and Windwood of Maple Valley's obligations to WDR on its note (which the Defendants claim was expunged and the Plaintiff states is still in effect, either in law or equity under Massachusetts cases), questions of fact have been raised and require the issues to be tried. In this vein, Plaintiffs point to the case relied upon by movants, Awed v Marisco, 538 NE 2d 43 (Mass Ct. App. 1989), which held that even where a co-guarantor pays off a debt, thereby extinguishing the guarantee, such party still has a claim against the co-maker in equity and under the Uniform Commercial Code, for contribution. "