A Lot of Really Unhappy Clients Left Behind

Attorney licensed in NY and California forms a partnership with a non-attorney to represent home owners under water across the country.  Around 2011 the attorney goes to Hawaii to change his name from Sean Alan Rutledge to Alan Frank.  During this period of time his legal practice in California is unraveling.

"Respondent's disciplinary proceedings in California arose from his operation of United Law Group (ULG), through which he represented homeowners in California and other states who were in default on mortgage payments or in foreclosure proceedings. In July 2009, the Office of the Chief Trial Counsel of the State Bar of California (OCTC) served respondent with a Notice of Disciplinary Charges alleging seven violations of the California Rules of Professional Conduct, in connection with his representation of a particular client. Specifically, respondent was charged with, inter alia, intentionally, recklessly, or repeatedly failing to perform legal services with competence; settling a client's claim or potential claim for malpractice without informing the client in writing that he may seek the advice of independent counsel and without giving the client a reasonable opportunity to do so; failing to refund unearned fees; and forming a partnership involving the practice of law with a nonlawyer. Respondent, through counsel, submitted an answer denying all charges.

On November 6, 2009, after a hearing in which respondent was represented by counsel, the State Bar Court issued a lengthy decision and order granting an application by the OCTC to have respondent involuntarily declared an inactive member of the bar. The State Bar Court found that there was clear and convincing evidence that respondent's conduct posed a substantial threat of harm to his clients or the public and, absent the court's intervention, respondent would continue to harm present and future clients. Additionally, the court determined it was likely that the State Bar would prevail on additional counts of misconduct raised by other clients' complaints.

Shortly thereafter, respondent submitted his "Resignation With Charges Pending" on November 25, 2009, and according to the Committee, "fled" California and could not be located. The State Bar Court stayed the disciplinary matter pending a ruling on respondent's resignation by the Supreme Court of California. By order of July 13, 2011, the Supreme Court of California [*3]accepted respondent's resignation.

The Committee assumed this matter from the Appellate Division, Third Department's Committee on Professional Standards, perhaps because the Committee has been investigating numerous complaints — many of which are similar in nature to those made in California — filed against respondent since 2009. The Third Department, noting that placement of respondent on involuntary inactive status was a "regulatory procedure" and not "discipline" under California law, denied its committee's 2010 motion for reciprocal discipline without prejudice to the re-filing of charges. Nevertheless, we agree with the Committee that this Court is not bound by the Third Department's prior order because it pre-dated the California Supreme Court's order accepting respondent's resignation.

Respondent was served with the Committee's petition for reciprocal discipline at his registered address in California (by first-class and certified mail, return receipt requested), yet he has not submitted a response.

We find that reciprocal discipline is warranted in this case and, therefore, respondent should be disbarred. There are only three defenses to reciprocal discipline, enumerated at 22 NYCRR 603.3(c): (1) a lack of notice and opportunity to be heard in the foreign jurisdiction; (2) an infirmity of proof establishing the misconduct; and (3) that the misconduct at issue in the foreign jurisdiction would not constitute misconduct in New York. Notwithstanding respondent's failure to raise any of these defenses, none are available here.

Respondent received notice of the allegations against him in the charges filed by the OCTC, and he was afforded the opportunity to be heard. Represented by counsel, he answered the charges, unsuccessfully contested the OCTC's application to have him declared involuntarily inactive, and then voluntarily submitted his resignation in California. Furthermore, there was no infirmity of proof establishing respondent's misconduct. Indeed, the State Bar Court's order placing him on involuntary inactive status was amply supported by documentary evidence.

In addition, the charges under which respondent resigned in California would likewise constitute misconduct under both New York's former Code of Professional Responsibility and the current Rules of Professional Conduct (rules) (22 NYCRR 1200.0) (see DR 6-101(a)(2) (22 NYCRR 1200.30[a][2]) [inadequate preparation] and rule 1.1 (a) [failure to provide competent representation]; DR 6-101(a)(3) (22 NYCRR 1200.30[a][3]) and rule 1.3(b) [neglect]; rule 1.3(a) [failure to act with reasonable diligence and promptness]; DR 6-102(a) (22 NYCRR 1200.31[a]) and rule 1.8(h) [improper agreement to settle a client claim, or potential claim, for legal malpractice]; DR 2-106(a) (22 NYCRR 1200.11[a]), DR 2-110(a)(3) (22 NYCRR 1200.15[a][3]), rule 1.5(a) and rule 1.16(e) [failure to promptly refund unearned fees]; DR 3-102(a) (22 NYCRR 1200.17[a]) and rule 5.4(b) [improper partnership with a nonlawyer]).[FN2]

Thus, the only remaining issue is the appropriate sanction to be imposed. "
 

Posted In Legal Malpractice Basics
Comments / Questions (0) | Permalink

Strong Suspicion But No Legal Malpractice

Wo Yee Hing Realty, Corp. v Stern  2012 NY Slip Op 05792   Decided on July 31, 2012
Appellate Division, First Department   is an example of just how minutely the AD will examine an "underlying case" when deciding a case of legal malpractice.  Here, plaintiffs hired an attorney to do the closing on a commercial property, and a deep split of testimony takes place.  Plaintiff and Defendant agree that Defendant attorney did not have the requisite knowledge to handle a 1031 exchange, yet he held the closing.  There was no 1031 exchange, there could be no 1031 exchange after the checks were made out to plaintiffs yet there is no legal malpractice.  Plaintiffs paid capital gains tax of $ 5 Million +
 

"The parties' claims as to the understanding that was reached regarding the corporation's retention of defendant are diametrically opposed. According to plaintiff's principals, defendant assured them that the anticipated sale could be structured as a "like-kind exchange" under Internal Revenue Code (26 USC) § 1031, which permits taxes on gains from the sale of real property to be deferred if the seller purchases another property of like kind, within certain parameters (see 26 USC § 1031[a]). Plaintiff asserts that defendant "held himself out as knowledgeable in [1031 exchanges] and able to effectuate the sale and transfer of real property" to enable it to take advantage of the capital gains tax deferral.

Defendant, however, asserts that he informed plaintiff's principals that he "had no expertise or experience with structuring Section 1031 like-kind exchanges" and that responsibility for taking advantage of Section 1031 would fall to them, and that they assured him that they were familiar with 1031 exchanges and would take care of that aspect of the transaction. "

"Strong evidence that defendant acted negligently is presented by his admission that he told the Yungs that he was not qualified to handle a 1031 exchange, but nevertheless undertook the preparation of the contract of sale. "[A]n attorney is obligated to know the law relating to the matter for which he/she is representing a client and it is the attorney's duty, if he has not knowledge of the statutes, to inform himself, for, like any artisan, by undertaking the work, he represents that he is capable of performing it in a skillful manner" (Fielding v Kupferman, 65 AD3d 437, 440 [2009] [internal quotations marks omitted]). Defendant's failure to have the checks made payable to a qualified intermediary similarly constitutes evidence of his negligence, since that failure would preclude plaintiff from taking advantage of the like-kind exchange option (see 26 CFR 1.1031[k]-1[f]).

In seeking summary judgment dismissing the case, defendant contends that plaintiff cannot show that his negligence, if any, caused plaintiff's alleged losses. He relies on the absence of evidence of a pending deal that plaintiff could have used to consummate a 1031 exchange. Plaintiff argues, citing Suppiah v Kalish (76 AD3d 829, 832 [2010]) that defendant was required to submit an expert affidavit establishing that even if he did commit malpractice, his actions were not the proximate cause of its losses. However, Suppiah concerned an allegation of attorney malpractice in an immigration matter that involved issues so "byzantine" that the issue of proximate cause could not be resolved without expert testimony (id. at 833). Here, by contrast, the mechanics of the governing legal framework are undisputed, and the issue of proximate cause turns on the discrete factual question of whether plaintiff took the requisite actions to identify and purchase a suitable replacement property in the required time frame. There is no need for expert testimony on the point.

The question is therefore whether plaintiff raised an issue of fact as to whether negligence on defendant's part proximately caused its claimed losses. "

"Unlike the dissent, we do not think that defendant's failure to have the checks made out to a qualified intermediary eliminates plaintiff's burden to offer evidence showing that but for defendant's negligence, it would have been able to complete a valid like-kind exchange. Although it is now clear that, as the dissent puts it, "the opportunity for a like-kind exchange was irretrievably lost once plaintiff received the proceeds of the sale," it is also clear that plaintiff had failed to satisfy all the other elements required for the successful completion of other such an exchange, and that the failure to meet those requirements is not attributable to defendant's alleged negligence."

 

Posted In Legal Malpractice Basics
Comments / Questions (0) | Permalink

An Overly Generous Decision is Pruned Back, Plaintiff Still Loses in Legal Malpractice

Relentlessly applying analysis to the "but for" portion of a legal malpractice claim, the 2d Department modified a CPLR 3211 decision by Supreme Court.  Here, it reversed dismissal under CPLR 3211(a)(1) yet the case remains dismissed under CPLR 3211(a)(7) because the client could not pay the mortgage.

in Cervini v Zanoni ;  2012 NY Slip Op 03582   Decided on May 8, 2012   Appellate Division, Second Department  went through the argument.  Plaintiff sues defendant attorney for failing to make sure there was a three day rescission in the mortgage.  He still loses the legal malpractice case based upon the complaint which alleged that he was having significant problems paying the mortgage anyway.
 

"The Supreme Court, however, properly granted that branch of the defendant's motion which was to dismiss the complaint pursuant to CPLR 3211(a)(7). In considering a motion pursuant to CPLR 3211(a)(7), the facts alleged in the complaint are generally accepted as true and the plaintiffs are afforded the benefit of every possible inference (see Reid v Gateway Sherman, Inc., 60 AD3d 836, 837; Roth v Goldman, 254 AD2d 405, 406). In determining a motion to dismiss pursuant to CPLR 3211(a)(7), the court is concerned with only whether the facts as alleged fit within any cognizable legal theory (see AG Capital Funding Partners, L.P. v State St. Bank & Trust Co., 5 NY3d 582, 591; Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d at 326; Leon v Martinez, 84 NY2d at 87-88; Peery v United Capital Corp., 84 AD3d 1201).

"The equitable goal of rescission under TILA is to restore the parties to the status quo ante' . . . [I]t was not the intent of Congress to reduce the mortgage company to an unsecured creditor or to simply permit the debtor to indefinitely extend the loan without interest" (American Mtge. Network, Inc. v Shelton, 486 F3d 815, 820-821 [citations omitted]). Accordingly, "[e]ffective rescission under the [TILA] requires the borrower to make restitution of the amounts expended by the lender" (Clemmer v Liberty Fin. Planning, Inc., 467 F Supp 272, 276; see Bustamante v First Fed. Sav. & Loan Assn. of San Antonio, 619 F2d 360, 365). Thus, in order to state a cause of action for rescission of a loan and mortgage under the TILA, a mortgagee must assert both the mortgagor's alleged TILA disclosure violation and that he or she can tender to the mortgagor the principal of the loan (see Berkeley Fed. Bank & Trust v Siegel, 247 AD2d 498).

Here, in alleging that the defendant committed legal malpractice by failing to answer and by failing to rescind the subject mortgage and loan pursuant to the TILA, the complaint fails to allege that the plaintiffs were able to tender to Wells Fargo the principal of the mortgage loan. Moreover, the plaintiffs admit in their proposed amended complaint that they "could not make their mortgage payments under [a] forbearance agreement" they had entered into while represented by the defendant herein. Accordingly, both the complaint and the proposed amended complaint failed to state a cause of action for legal malpractice based on the defendant's failure to rescind the subject loan and mortgage pursuant to Wells Fargo's alleged violation of the TILA. Therefore, the Supreme Court properly granted that branch of the defendant's motion which was to dismiss the complaint pursuant to CPLR 3211(a)(7).

Since the proposed amended complaint was patently devoid of merit, the plaintiffs' cross motion for leave to amend the complaint should have been denied on the merits (see CPLR 3025[b]; Martin v Southern Container Corp., 92 AD3d 647, 649). [*3]"

 

Posted In Legal Malpractice Basics
Comments / Questions (0) | Permalink

Its a Digital World, but Uncertainty Remains

Today, litigants are able to access so much more than in the past.  When we started out, one read the NYLJ small print decisions from the AD, and there was no more modern way to get the news.  Later, digital reporting has taken over.  Yet, Supreme Courts do not regularly scan and publish decisions.  This unfortunate situation leaves us in the dark.  What, for example was argued and written inLass v Soren   2012 NY Slip Op 02085   Decided on March 20, 2012   Appellate Division, Second Department.
 

Here's what we know.  The only attorneys listed are both defense firms.  The decision is as opaque as possible.  Here it is:  "In an action to recover damages for legal malpractice, the defendants Steven J. Soren and Soren & Soren appeal, as limited by their brief, from so much of an order of the Supreme Court, Richmond County (McMahon, J.), dated May 11, 2010, as granted that branch of the motion of the defendant Stewart B. Schachner which was pursuant to CPLR 3211(a) to dismiss their cross claim against him.

ORDERED that the order is affirmed insofar as appealed from, with costs.

Under the facts of this case, the Supreme Court correctly granted the branch of the motion of the defendant Stewart B. Schachner which was to dismiss the subject cross claim. "

We even looked up the index number and tried to read the lower court opinion.  It is not available, and the only indication is "short form order."

Is this the way to run the state's courts?

 

 

Posted In Legal Malpractice Basics
Comments / Questions (0) | Permalink

A Divorce Legal Malpractice Case in the 4th Department

Malachowski v Daly ; 2011 NY Slip Op 06720 ; Decided on September 30, 2011 ; Appellate Division, Fourth Department  is a divorce legal malpractice case from Utica, and it demonstrates two things.  Plaintiff must, early on, set the tone and state the claims in bills of particular and during early discovery, and once having determined the claims, they must be robust enough to pass muster with the Court and the AD.  Here, a late-made claim that wife's credit card debt was understated, and that the attorney failed to discover the correct amount is undercut by the fact that the credit card debt was understated by $ 74.00  The same is more or less true for pension benefits and other claims.

"We further conclude that the court properly granted that part of the motion seeking dismissal of the amended complaint insofar as it alleges that defendant failed to move to vacate the stipulation entered in the underlying divorce action, inasmuch as plaintiff did not retain defendant for that purpose (see DiGiacomo v Levine, 76 AD3d 946, 949-950). We note that plaintiff contends for the first time on appeal that defendant promised to move for vacatur. Because plaintiff did not set forth that contention in the amended complaint or in the bill of particulars, or otherwise raise the issue in Supreme Court, that contention is not properly before us (see Ciesinski v Town of Aurora, 202 AD2d 984, 985).

Plaintiff's remaining contention is that the court erred in granting that part of defendant's motion with respect to his claim that defendant was negligent in failing to discover prior to settlement of the underlying divorce action that plaintiff's ex-wife, upon retirement, would receive payments of $500 per month from her then employer, over and above her anticipated pension benefits. We reject that contention. As the court noted in its decision, and as plaintiff concedes on appeal, the exact nature of the payments to plaintiff's ex-wife is unclear from the record. It cannot be determined whether the payments constitute marital property, as plaintiff suggests, or whether, as defendant posits, they constitute social security bridge payments, which do not constitute a form of deferred compensation and thus are not marital property (see Olivo v Olivo, 82 NY2d 202, 208). Plaintiff's claim regarding the payments in question was not set forth in the amended complaint, nor was it referenced in the bill of particulars. Instead, it was raised for the first time by plaintiff in opposition to defendant's motion. "
 

Posted In Legal Malpractice Basics
Comments / Questions (0) | Permalink

Retired Attorneys, Legal Malpractice and Professional Responsibility

Anthony E. Davis of Hinshaw & Culbertson LLPm is a well known practitioner in the Professional Responsibility field. He is the past president of the Association of Professional Responsibility Lawyers, a columnist in the New York Law Journal and an expert witness.

He writes today on the question of retired attorneys in New York who certify that they are retired, usually in order to avoid paying bi-annual fees to the UCA. He notes that the decision to permit retired attorneys to use a professional letterhead creates potential legal malpractice problems. The column appears in today's NYLJ.

Posted In Legal Malpractice Basics
Comments / Questions (0) | Permalink

60 Day Motion Rule

OCA issued this rule over the new years vacation, but no one should miss the significance of movant's obligation to comply. New York Civil Law Blog reports it, and includes an OCA press release. It is also mentioned in Sui Generis

Posted In Legal Malpractice Basics
Comments / Questions (0) | Permalink

Legal Malpractice articles

Here are a series of legal malpractice articles by John Blumberg reprinted from another site.

Posted In Legal Malpractice Basics
Comments / Questions (0) | Permalink

How to Ward off Legal Malpractice

Here's a fascinating article on how to avoid Legal Malpractice from the National Law Journal. Here is the article.

Posted In Legal Malpractice Basics
Comments / Questions (0) | Permalink

Attorney Disbursements

Attorneys charge clients for disbursements. These disbursements may be court fees, fees for court transcripts, for deposition transcripts, for photocopying, for telefaxes, for telephone service, for computerized legal research, for postage, for messengers, for meals, for lodging, and for other necessities.

Continue Reading Posted In Legal Malpractice Basics
Comments / Questions (0) | Permalink

Unexpected Circumstances

In a recent successful case, plaintiff was a large real estate management company. Plaintiff was involved in a 500 million dollar financing involving 3 NYC downtown buildings. The general counsel asked one of the multiple large firms whether "mortgage spreading" could be used to avoid payment of new mortgage tax. When told "no", the financing continued to closing. At closing it was determined that $1.7 million in mortgage tax could have been legally avoided, contrary to the advice. Prior to jury selection this case settled for $ 900,000.

Continue Reading Posted In Legal Malpractice Basics
Comments / Questions (0) | Permalink

Charging and Retaining Liens

A common law retaining lien entitles the outgoing attorney to retain all papers, securities, or money belonging to the client that came into the attorney's possession in the course of representation, as security for payment of attorney's fees. Arising from Judiciary Law 475, it is enforceable only by retention of the items themselves and is lost if the file or documents are no longer in the attorney's possession.

Continue Reading Posted In Legal Malpractice Basics
Comments / Questions (0) | Permalink

Attorney Fees and the End of the Relationship

It is the general rule in the United States, and New York that the client, either for good cause or for no cause, may terminate an attorney's representation at any time.

Continue Reading Posted In Legal Malpractice Basics
Comments / Questions (0) | Permalink

Liens in New York

A common law retaining lien, known also as a "general possessory lien" entitles the outgoing attorney to "retain all papers, securities, or money belonging to the client" that came into the attorney's possession in the course of representation, as security for payment of attorney's fees"

Continue Reading Posted In Legal Malpractice Basics
Comments / Questions (0) | Permalink

Termination for Cause

Good cause for termination is not the same as malpractice. Attorney malpractice, the deviation from good and accepted practice, which proximately damaged the party,

Continue Reading Posted In Legal Malpractice Basics
Comments / Questions (0) | Permalink