The Volcano and Legal Malpractice

Allentown, PA is the epicenter of this legal malpractice case.  A group of investors wanted to start a nightclub/bar, and started to explore the Pennsylvania countryside in order to locate the Volcano, where they would set up bar.

Things did not go well.  Allentown was just not ready for the Volcano.  It was too loud, and its permits were not renewed.  The NY attorneys signed up to litigate, even though they were not admitted in PA.  The problem begins. It ends with a choice of law question and the borrowing statute.

Patel v Scheurer  2014 NY Slip Op 30923(U)  April 4, 2014  Supreme Court, New York County  Docket Number: 650185/08  Judge: Saliann Scarpulla.  "In April 2002, the PLCB notified Volcano that, due to the number of times Volcano had been cited for violating regulations, it might decline to renew the liquor license and amusement permit for the establishment. In a letter dated May 21, 2003, the PLCB gave final notice to Volcano that its amusement permit would not be renewed and, ultimately, Volcano went out of business. Believing that it had been discriminatory targeted by the PLCB, plaintiffs consulted with Terence C. Scheurer, Esq. ("Scheurer") and signed a retainer agreement with the law firm of Scheurer & Hardy, PC ("S&H") on January 30, 2002 (the "Retainer"). S&H, a New York firm whose lawyers were not admitted to practice in Pennsylvania, was retained to "represent[] [Volcano] in a possible civil matter against the Pennsylvania State Police along
with other possible individuals and/or entities."2 Notice of Motion, Ex. J, ii l (emphasis in original). The Retainer further provides that it "does not cover any additional work in connection with appeals from any court decisions, orders, or any other actions." Id., ii 7. Finally, the Retainer states that ~'[a]ny and all changes to this retainer agreement must be made in writing and signed by both parties."

"Scheurer allegedly shared his views with LaManna regarding plaintiffs' potential claims and LaManna agreed to draft and file plaintiffs' complaint (the "Federal Complaint"). LaManna filed the Federal Complaint in the District Court for the Eastern District of Pennsylvania on November 15, 2002. Consistent with the terms of the Amended Retainer, defendants were listed as counsel on the Federal Complaint, but they did not sign it. Nevertheless, S&H claims that it did not authorize or consent for LaManna to put their firm name and address on the Federal Complaint, did not sign any pleading filed in Federal Court on behalf of plaintiffs, and did not file a Notice of Appearance in the Federal Action. By order dated January 31, 2005, the District Court entered summary judgment in favor of defendants and dismissed the complaint in its entirety. Plaintiffs filed a motion for reconsideration and, by order dated June 20, 2005, the Court granted that motion in part, but affirmed summary judgment dismissing the complaint. Plaintiffs commenced the present action on June 17, 2008, asserting causes of action for legal malpractice, breach of fiduciary duty, and breach of contract based on defendants' "

"Because plaintiffs' claim for legal malpractice was not filed within two years of the alleged malpractice and plaintiffs do not allege, much less meet, this standard for tolling under Pennsylvania }aw, their claim is time-barred. See Kat House Prods., LLCv. Paul, Hastings, Janofsky& Walker, LLP, 2009WL1032719(Sup. Ct., NY Co. Apr. 6, 2009)( dismissing legal malpractice claims time-barred in California); see also Portfolio Recovery Assoc., LLC v. King, 14 N.Y.3d 410 (2010)(holding that because contract claims are time-barred in Delaware, under CPLR 202 they are time-barred in New York); Metropolitan Life Ins. Co. v. Morgan Stanley, 2013 WL 3724938, *8 (Sup. Ct., NY Co. June 8, 2013). Plaintiffs' claim for breach of fiduciary duty is also subject to a two-year statute of limitations under Pennsylvania law. See Zimmer v. Gruntal & Co., Inc., 732 F.Supp. 1330, 1336 (W.D. Pa. 1989)(citing 42 Pa. Cons. Stat. 5524(7))."

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A Shocking Story in Syracuse

Small Smiles is a horror story of dental marketing, and the abuse of children.  There is a legal malpractice aspect to it, which is wholly overshadowed by the callous dentistry here.

"All plaintiffs allege that: (1) defendants engaged in a scheme to treat patients for Forba's profits rather than for plaintiffs' dental needs; (2) the New York clinics operated in violation of law because they were not owned or controlled by licensed dentists; (3) defendants engaged in a course of conduct that intended to create "a culture at the clinics that put revenue generation as a top priority at the expense of quality of dental treatment" (Compl. ¶56); (4) defendants utilized a common "fraudulent script" with patients regarding the risks of restraints (Compl. ¶68); (5) defendants engaged in deceptive acts or practices; and (6) the treating dentists committed dental malpractice by following the Forba business model of increasing production (procedures) per patient and wrongfully restraining children.
 

Here are some examples:

"Plaintiff Bohn treated at the Syracuse Small Smiles clinic between May 2006 and March 2008, when he was between the ages of three and five. During that time he had four root canals with crowns, seven fillings, two extractions and one crown without a corresponding root canal. He was restrained twice, and on three occasions his teeth were filled without anesthesia. Compl. ¶155.

Defendant Montanye treated at the Syracuse Small Smiles clinic between June 2006 and September 2007, when he was between the ages of two and three. During that time he had four root canals with crowns and six fillings. He was restrained three times, and on three occasions his teeth were filled without anesthesia. Compl. ¶ 163.

Plaintiff Fortino treated at the Syracuse Small Smiles clinic between August 2005 and February 2007, when she was between the ages of four and six. During that time, she had nine root canals with crowns, two fillings, two crowns without corresponding root canals and one extraction. She was restrained four times. Compl. ¶157.

Plaintiff Kenyon treated at the Syracuse Small Smiles clinic between April 2005 and September 2008, when he was between the ages of three and seven. During that time, he had six root canals with crowns and seven fillings. He was restrained three times, and on three occasions his teeth were filled without anesthesia. Compl. ¶158.

Plaintiff Mathews treated at the Syracuse Small Smiles clinic between June 2005 and May 2006, when he was between the ages

of three and four. During that time, he had five teeth filled, two extractions, and one root canal with a crown. He was restrained five times, and on two occasions his teeth were filled without anesthesia. Compl. ¶160. "
 

We'll discuss the legal malpractice aspects tomorrow.

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No Contribution and No Indemnification in this Legal Malpractice Case

A real estate development gone wrong.  It's a common litigation situation, and attorneys are often in for the legal malpractice aspect of the case.  Here, in YDRA,LLC v Mitchell   2014 NY Slip Op 50505(U)    Decided on April 3, 2014   Supreme Court, Queens County   Siegal, J.
 

Supreme Court, Queens County untwists the skein of relationships and claims. 

"On or about September 2, 2012, Plaintiff commenced the within action asserting claims of legal malpractice, architectural malpractice, fraudulent inducement, contract recision and negligence.

Papa was retained by Paul Sklar ("Sklar") by written agreements dated March 15, 2006 and August 9, 2006, to provide a zoning analysis of the subject real property to get Department of Building approval for the construction of a new building on an adjacent lot while the existing building remained. Papa completed his services but Whitestone 8888 Corp opted not to construct the new building. Papa contends that its services were completed at this point.

Plaintiff took title to the property from Whitestone in January of 2009, retaining defendant Mitchell, & Incantalupo ("Mitchell") and Wax Ferraro Architect, PC ("Ferraro") to assist with the purchase.

Plaintiff ultimately brought the within action for breach of contract and negligence as a result of Plaintiff's inability to secure approval for new construction. On or about November 23, 2011, Plaintiff executed a Stipulation of Discontinuance in favor of Christopher V. Papa. However, prior to the discontinuance defendant Mitchell and Ferraro asserted cross-claims against Papa for contribution and indemnification. "

"Initially, Papa contends that Mitchell and Ferraro may not maintain an action for contribution because the Plaintiff seeks to recover only economic losses. Pursuant to CPLR 1401, "two or more persons who are subject to liability for damages for the same personal injury, injury to property or wrongful death, may claim contribution among them whether or not an action has been brought or a judgment has been rendered against the person from whom contribution is sought." Contribution is unavailable for claims seeking recovery for purely economic loss resulting from the breach of contractual obligations. (Capstone Enterprises of Port Chester, Inc. v. Board of Educ. Irvington Union Free Capstone Enterprises of Port Chester, Inc. v. Board of Educ. Irvington Union Free [*3]School Dist., 106 AD3d 856 [2nd Dept 2013] citing Clark-Fitzpatrick, Inc. v. Long Island R. Co., 70 NY2d 382 [1987]; Galvin Brothers, Inc. v. Town of Babylon, 91 AD3d 715 [2nd Dept 2012].) In the within action, Plaintiff is seeking the purely economic relief of recovery of the purchase price of the Property. Accordingly, a claim for contribution from Papa must be dismissed. "

"A right to indemnification can only arise where there is a written contract providing for indemnification or whether indemnification is implied under common law. (Facilities Dev. Corp. v Miletta, 180 AD2d 97 [3rd Dept 1992]; Rosado v Proctor & Schwartz, 66 NY2d 21 [1985] citing Prosser and Keeton, Torts § 51, at 341 [5th ed].) It is undisputed that there is no contractual relationship between Mitchell or Ferraro. Furthermore, Mitchell and Ferraro's liability is based upon the their alleged breach of obligations owed to the Plaintiff, rather than upon vicarious liability attributed solely to the fault of Papa, therefore Mitchell and Ferraro do not have a legally viable claim for implied indemnification against Papa. (Mount Vernon Fire Ins. Co. v Mott, 179 AD2d 626 [2nd Dept 1992]; Dormitory Auth. of State of NY v Caudill Rowlett Scott, 160 AD2d 179 [2nd Dept 1990].) Accordingly, as Mitchell and Ferraro have no contractual relationship with Papa and each of the defendants were retained separately from Papa, there can be no claim for indemnification as against Papa."

 

 

 

 

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Is Legal Malpractice a Tort ?

Legal malpractice is a tort, right?  Everyone knows that it's a variety of negligence, and it can be pled in tort or in contract?  Technically, yes, but its really a different kind of tort.  It does not have unlimited damages (think emotional disturbance) it does not allow for windfalls (think "ascertainable damages") and in generally, the rules are very, very special for attorneys.

As an example, take Chang Yi Chen v Zhen Huang   2014 NY Slip Op 50517(U)   Decided on March 31, 2014   Supreme Court, Kings County  where Judge Schmidt freely admits that legal malpractice has public policy and other considerations attached to it that no other branch of the law requires.

"For the purpose of this motion, defendant does not dispute plaintiff's central allegation that the sale transactions were structured in a way that would have qualified for the deferral of the payment of capital gains taxes but for defendant's release of the proceeds relating to the sale property directly to plaintiff in contravention of the requirement that plaintiff could not receive such proceeds actually or constructively in order to take advantage of the section 1031 exchange (see United States v Okun, 453 Fed Appx 364, 366 n1 [4th Cir 2011], cert denied ___ US ___, 132 SCt 1953 [2012]; see also Endless Ocean, LLC, v Twomey, Latham, Shea, Kelly, Dubin & Quartararo, 113 AD3d 587, 588-589 [2d Dept 2014]; Wo Yee Hing Realty Corp. v Stern, 99 AD3d 58, 64 [1st Dept 2012]).[FN3] The court's determination thus turns on whether plaintiff has a legal basis for obtaining damages from defendant.

"Damages in a legal malpractice case are designed to make the injured client whole'" (Rodolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 443 [2007], quoting Campagnola v Mulholland, Minion & Roe, 76 NY2d 38, 42 [1990]). Generally, the same compensatory damages rules applicable in contract cases apply to damages allowed in legal malpractice cases (Campagnola, 76 NY2d at 42). Such damages are not intended to provide a party with a windfall (id. at 45). However, in light of the unique fiduciary and ethical obligations of attorneys, public policy, at times, requires that traditional contract rules of damages be applied in a different manner in cases involving legal malpratice (id. at 43-44).

Here, defendant correctly asserts that taxes paid are generally not recoverable as damages under New York law (see Menard M. Gertler, M.D., P.C. v Sol Masch & Co., 40 AD3d 282, 283 [1st Dept 2007]; Alpert v Shea Gould Climenko & Casey, 160 AD2d 67, 71-72 [1st Dept 1990]; see also Lama Holding Co. v Smith Barney, 88 NY2d 413, 422-423 [1996]). This is because tax liability results from a taxable event and allowing recovery for the payment of such tax would therefor constitute a windfall for a plaintiff (see Alpert, 160 AD2d at 71-72; Apple Bank for Sav. v PricewaterhouseCoopers, LLP, 23 Misc 3d 1126 [A], 2009 NY Slip Op 50948 * 6 [U] [Sup Ct, New York County 2009], modified on other [*4]grounds 70 AD3d 438 [1st Dept 2010]; see also, Lama Holding Co., 88 NY2d at 423; Gaslow v KPMG LLP, 19 AD3d 264, 265 [1st Dept 2005], lv dismissed 5 NY3d 849 [2005]). In addition, damages that are uncertain or unduly speculative may not be recovered in New York (Ashland Mgt. Inc. v Janien, 82 NY2d 395, 403 [1993]; Farrar v Brooklyn Union Gas Co., 73 NY2d 802, 804 [1988]; see also Solin v Domino, 501 Fed Appx 19, 22 [2d Cir 2012]).

In conjunction, these principles preclude plaintiff from recovering as damages the amount he paid to the IRS as capital gains taxes, at least on the facts here, where plaintiff has not sold the replacement property. In this regard, in a properly completed section 1031 exchange, the basis from the property sold becomes the basis for the replacement property, and the recognition of any gain or loss is deferred until the replacement property is sold in a sale that does not involve a section 1031 exchange (see Ocmulgee Fields, Inc. v C.I.R., 613 F3d 1360, 1364-1365 [11th Cir 2011]). The tax consequences of such a deferral depend on many factors, including any change in the capital gains tax rate, IRS rules for determining capital gains, market forces affecting the value of the property, and plaintiff's ability to offset the gain against the losses (see generally Internal Revenue Code [USC] § 1001; Internal Revenue Code [USC] subtitle A, Chapter 1, subchapter P; IRS, Topic 409 - Capital Gains & Losses, http://www.irs.gov/taxtopics/tc409.html [last reviewed or updated Feb. 27, 2014, accessed March 28, 2014]). As plaintiff has not sold the Purchase Property, any determination at this time that his capital gains liability would be less at the time of a future sale of the Purchase Property than he was actually required to pay involves future changeable events, and is thus inherently speculative (see Farrar, 73 NY2d at 804; Solin, 501 Fed Appx at 22; see also Ashland Mgt. Inc, 82 NY2d at 403; see also Menard M. Gertler, M.D., P.C., 40 AD3d at283; Alpert, 160 AD2d at 71-72).[FN4] "

 

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Taxes and Death. Taxes Don't Qualify as Damages for Legal Malpractice

Yesterday, we discussed Chang Yi Chen v Zhen Huang   2014 NY Slip Op 50517(U)   Decided on March 31, 2014   Supreme Court, Kings County   Schmidt, J. .  Put in short, Plaintiff initiated a 1031 like-kind real estate exchange, only to have it fail because the attorney returned the escrow money to Plaintiff in order to do the purchase.  Plaintiff paid capital gains taxes.  Are they recoverable?  No.
 

""Damages in a legal malpractice case are designed to make the injured client whole'" (Rodolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 443 [2007], quoting Campagnola v Mulholland, Minion & Roe, 76 NY2d 38, 42 [1990]). Generally, the same compensatory damages rules applicable in contract cases apply to damages allowed in legal malpractice cases (Campagnola, 76 NY2d at 42). Such damages are not intended to provide a party with a windfall (id. at 45). However, in light of the unique fiduciary and ethical obligations of attorneys, public policy, at times, requires that traditional contract rules of damages be applied in a different manner in cases involving legal malpratice (id. at 43-44).

Here, defendant correctly asserts that taxes paid are generally not recoverable as damages under New York law (see Menard M. Gertler, M.D., P.C. v Sol Masch & Co., 40 AD3d 282, 283 [1st Dept 2007]; Alpert v Shea Gould Climenko & Casey, 160 AD2d 67, 71-72 [1st Dept 1990]; see also Lama Holding Co. v Smith Barney, 88 NY2d 413, 422-423 [1996]). This is because tax liability results from a taxable event and allowing recovery for the payment of such tax would therefor constitute a windfall for a plaintiff (see Alpert, 160 AD2d at 71-72; Apple Bank for Sav. v PricewaterhouseCoopers, LLP, 23 Misc 3d 1126 [A], 2009 NY Slip Op 50948 * 6 [U] [Sup Ct, New York County 2009], modified on other [*4]grounds 70 AD3d 438 [1st Dept 2010]; see also, Lama Holding Co., 88 NY2d at 423; Gaslow v KPMG LLP, 19 AD3d 264, 265 [1st Dept 2005], lv dismissed 5 NY3d 849 [2005]). In addition, damages that are uncertain or unduly speculative may not be recovered in New York (Ashland Mgt. Inc. v Janien, 82 NY2d 395, 403 [1993]; Farrar v Brooklyn Union Gas Co., 73 NY2d 802, 804 [1988]; see also Solin v Domino, 501 Fed Appx 19, 22 [2d Cir 2012]).

In conjunction, these principles preclude plaintiff from recovering as damages the amount he paid to the IRS as capital gains taxes, at least on the facts here, where plaintiff has not sold the replacement property. In this regard, in a properly completed section 1031 exchange, the basis from the property sold becomes the basis for the replacement property, and the recognition of any gain or loss is deferred until the replacement property is sold in a sale that does not involve a section 1031 exchange (see Ocmulgee Fields, Inc. v C.I.R., 613 F3d 1360, 1364-1365 [11th Cir 2011]). The tax consequences of such a deferral depend on many factors, including any change in the capital gains tax rate, IRS rules for determining capital gains, market forces affecting the value of the property, and plaintiff's ability to offset the gain against the losses (see generally Internal Revenue Code [USC] § 1001; Internal Revenue Code [USC] subtitle A, Chapter 1, subchapter P; IRS, Topic 409 - Capital Gains & Losses, http://www.irs.gov/taxtopics/tc409.html [last reviewed or updated Feb. 27, 2014, accessed March 28, 2014]). As plaintiff has not sold the Purchase Property, any determination at this time that his capital gains liability would be less at the time of a future sale of the Purchase Property than he was actually required to pay involves future changeable events, and is thus inherently speculative (see Farrar, 73 NY2d at 804; Solin, 501 Fed Appx at 22; see also Ashland Mgt. Inc, 82 NY2d at 403; see also Menard M. Gertler, M.D., P.C., 40 AD3d at283; Alpert, 160 AD2d at 71-72).[FN4] "

What about interest paid to the IRS?  It maybe recoverable.  "On the other hand, plaintiff may be entitled to recover the amounts paid to the IRS as interest and penalties. Interest imposed by the IRS based on a failure to pay a tax generally may not be recovered as damages because the interest represents a payment to the IRS for the taxpayer's use of the money while the taxpayer was not entitled to the use of the money (see Shalam v KPMG LLP, 43 AD3d 752, 754 [1st Dept 2007]; Alpert, 160 AD2d at 72). Here, however, plaintiff, but for defendant's alleged malpractice, would have been entitled to the use of this money during the time for which IRS imposed interest. As such, plaintiff suffered a loss as the result of the IRS's imposition of interest and plaintiff's recovery of damages for such a loss would not constitute a windfall (see Jamie Towers Hous. Co. v William B. Lucas, Inc.,, 296 AD2d 359, 359-360 [1st Dept 2002]; Ronson v Talesnick, 33 F Supp2d 347, 355 [DNJ 1999]; see also Liebowitz v Kolodny, 24 AD3d 733, 733 [2d Dept [*5]2005]; Apple Bank for Sav., 2009 NY Slip Op 50948 * 6-7). For the essentially the same reasons, any penalty imposed by the IRS may be recovered as damages.[FN5]"

 

 

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A Small Dispute With Significant Legal Malpractice Issues

Chang Yi Chen v Zhen Huang   2014 NY Slip Op 50517(U)   Decided on March 31, 2014  Supreme Court, Kings County  Schmidt, J. is ostensibly about a single real estate deal, but it discusses two very significant issues.  One is the very nature of legal malpractice damages and the other is when interest paid by plaintiff is a recoverable damage.  We'll cover one today and one tomorrow.

"Plaintiff Chang Yi Chen alleges that defendant Zhen Huang, Esq., failed properly effectuate a real estate transaction intended to be structured as a "like-kind exchange" under Internal Revenue Code (26 USC) § 1031 in order to defer payment of capital gains taxes on the transaction.[FN1] Plaintiff alleges that he approached defendant, who held herself out as an attorney who specialized in real estate transactions, for advice regarding the tax consequences of selling property he owned in order to purchase another property. Defendant allegedly informed plaintiff that he could avoid paying capital gains taxes on the sale and purchase of a new property by way of a section 1031 transfer. Plaintiff thereafter retained defendant to represent him in the sale and purchase of properties through a section 1031 exchange.

On May 28, 2009 plaintiff entered into an agreement to purchase a property (Purchase Property) and on June 15, 2009, reached an agreement to sell the property he owned (Sale Property). Plaintiff alleges that these properties qualified as "like kind property" for purposes of a section 1031 exchange. The closing for the Sale Property occurred on September 1, 2009, and defendant held the proceeds of this sale in escrow until September 2, 2009, when she transferred these proceeds back to plaintiff. At a closing held on November 1, 2009, plaintiff used these sale proceeds to purchase the Purchase Property. Although plaintiff believed that these actions were sufficient to qualify for section 1031 tax treatment, the United States and New York State tax authorities thereafter issued tax warrants notifying plaintiff of deficiencies and penalties because the property transfers did not qualify for section 1031 treatment. According to plaintiff, the transfer did not qualify for such treatment because the proceeds from the sale of the Sale Property were held by defendant in escrow and then released directly to plaintiff in contravention of section 1031's requirement that such proceeds be held by a "qualified intermediary."

Plaintiff has since commenced this action, alleging causes of action for breach of contract, breach of fiduciary duty and legal malpractice based on defendant's alleged failure to insure that the transactions qualified for section 1031 treatment. Defendant now moves for summary judgment dismissing the complaint on the ground that, regardless of whether defendant committed malpractice in failing to effectuate a section 1031 exchange, plaintiff has not alleged any compensable damages. In this respect, defendant, pointing to the complaint, asserts that "plaintiff only seeks to recover the tax liabilities he incurred from the sale of the 57th Street property" (Memorandum of Law at 6). According to defendant, such damages are not recoverable because a section 1031 exchange only defers the payment of capital gains tax until the replacement property is sold, and that as such, plaintiff may not recover the capital gains tax he was required to pay since such a recovery would constitute [*3]a windfall. In addition, as plaintiff has not sold the Purchase Property,[FN2] a determination of the capital gains taxes he will owe with respect to the sale of the property would be unduly speculative. "

The Court eventually rules against Plaintiff on damages from the taxes paid.  

"In conjunction, these principles preclude plaintiff from recovering as damages the amount he paid to the IRS as capital gains taxes, at least on the facts here, where plaintiff has not sold the replacement property. In this regard, in a properly completed section 1031 exchange, the basis from the property sold becomes the basis for the replacement property, and the recognition of any gain or loss is deferred until the replacement property is sold in a sale that does not involve a section 1031 exchange (see Ocmulgee Fields, Inc. v C.I.R., 613 F3d 1360, 1364-1365 [11th Cir 2011]). The tax consequences of such a deferral depend on many factors, including any change in the capital gains tax rate, IRS rules for determining capital gains, market forces affecting the value of the property, and plaintiff's ability to offset the gain against the losses (see generally Internal Revenue Code [USC] § 1001; Internal Revenue Code [USC] subtitle A, Chapter 1, subchapter P; IRS, Topic 409 - Capital Gains & Losses, http://www.irs.gov/taxtopics/tc409.html [last reviewed or updated Feb. 27, 2014, accessed March 28, 2014]). As plaintiff has not sold the Purchase Property, any determination at this time that his capital gains liability would be less at the time of a future sale of the Purchase Property than he was actually required to pay involves future changeable events, and is thus inherently speculative (see Farrar, 73 NY2d at 804; Solin, 501 Fed Appx at 22; see also Ashland Mgt. Inc, 82 NY2d at 403; see also Menard M. Gertler, M.D., P.C., 40 AD3d at283; Alpert, 160 AD2d at 71-72).[FN4] 

On the other hand, plaintiff may be entitled to recover the amounts paid to the IRS as interest and penalties. Interest imposed by the IRS based on a failure to pay a tax generally may not be recovered as damages because the interest represents a payment to the IRS for the taxpayer's use of the money while the taxpayer was not entitled to the use of the money (see Shalam v KPMG LLP, 43 AD3d 752, 754 [1st Dept 2007]; Alpert, 160 AD2d at 72). Here, however, plaintiff, but for defendant's alleged malpractice, would have been entitled to the use of this money during the time for which IRS imposed interest. As such, plaintiff suffered a loss as the result of the IRS's imposition of interest and plaintiff's recovery of damages for such a loss would not constitute a windfall (see Jamie Towers Hous. Co. v William B. Lucas, Inc.,, 296 AD2d 359, 359-360 [1st Dept 2002]; Ronson v Talesnick, 33 F Supp2d 347, 355 [DNJ 1999]; see also Liebowitz v Kolodny, 24 AD3d 733, 733 [2d Dept [*5]2005]; Apple Bank for Sav., 2009 NY Slip Op 50948 * 6-7). For the essentially the same reasons, any penalty imposed by the IRS may be recovered as damages.[FN5]

Accordingly, defendant has failed to demonstrate her initial summary judgment burden of demonstrating, as a matter of law, that plaintiff cannot recover damages. As such, this portion of defendant's motion must be denied regardless of the sufficiency of plaintiff's opposition papers (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]). The court further notes that the motion turns almost entirely on the pleadings and that the only evidentiary fact before the court is plaintiff's admission that he has not sold the Purchase Property. Thus, to the extent that this motion, couched as a motion for summary judgment, should more appropriately be addressed as a motion to dismiss for failing to state a cause of action pursuant to CPLR 3211 (a) (7) (see Light v Light, 64 AD3d 633, 634 [2d Dept 2009]), the motion is denied because plaintiff has adequately pleaded that he suffered some cognizable damage as the result of the alleged malpractice (see Kocak v Egert, 280 AD2d 335, 336 [1st Dept 2001]). "

 

 

 

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A Tragic Outcome That Could Not Be Prevented

A child falls from the window.  The window had no child-guards. The landlord is at fault. The law firms sue and get a judgment. The landlord sells the building and disappears.  The money is hidden.  is the attorney at fault?

Noel v. Law Off of Mark E. Feinberg, 2014 NY Slip Op 50516(U)   Decided on March 31, 2014
Supreme Court, Kings County   Schmidt, J. is an awful story.  A landlord without insurance sells the buildings and successfully eludes a collection effort.  What should the PI attorney have done?   A lis pendens?  Pre-judgment attachment?  Sadly, NY law does not permit either.
 

"Plaintiff commenced this action seeking to recover damages for the alleged malpractice committed by defendants in the Personal Injury Action. Therein, plaintiffs sought to recover damages for injuries sustained by the infant plaintiff on July 12, 1997 when he fell out of a window that did not have proper and/or adequate window guards. Plaintiff alleges that in that action, defendants committed malpractice when they failed to obtain a pre-trial order of attachment for properties owned by Mr. George or to file a lis pendens against the properties. They allege that as the result of this malpractice and negligence on defendants' part, the judgment they obtained is can not be collected, since the properties owned by Mr. George were sold before the judgment was filed and immediately after the trial, Mr. George physically disappeared and cannot be located.

Plaintiff first retained the law firm of Jacoby & Meyers to bring the Personal Injury Action, but apparently due to the lack of liability insurance and general perception that Mr. George was insolvent, that firm did not actively prosecute the case. Accordingly, plaintiff retained defendants. On October 9, 1998, defendants filed a complaint on plaintiff's behalf in the Personal Injury Action. Defendants retained the firm of Weicholz, Monteleone, Peters & Studley (the Weicholz Firm) to act as trial counsel. Following a four day jury trial before the Honorable Gerald S. Held, the court rendered a directed verdict on the issue of liability and the jury rendered a verdict on the issue of damages in the amount of $500,000 for conscious pain and suffering and $1,500,000 for future conscious pain and suffering. The court accordingly entered a judgment in the amount of $2,010,545 on plaintiff's behalf.

Defendants then retained Michael T. Sucher, Esq., an experienced collections attorney, to enforce the judgment. Despite his efforts, he was unable to locate Mr. George or any assets belonging to him. Accordingly, plaintiff's judgment remains unsatisfied. "

"Pursuant to CPLR 6201(3), the only provision that could be applicable to the facts now before the court:

"An order of attachment may be granted in any action . . . where the plaintiff has demanded and would be entitled, in whole or in part, or in the alternative, to a money judgment against one or more defendants, when:
"[T]he defendant, with intent to defraud his creditors or frustrate the enforcement of a judgment that might be rendered in plaintiff's favor, has assigned, disposed of, encumbered or secreted property, or removed it from the state or is about to do any of these acts."


(see generally Crescentini v Slate Hill Biomass Energy, LLC, 113 AD3d 806 [2014]; Corsi v Vroman, 37 AD3d 397 [2007]). " Furthermore, the mere removal, assignment or other disposition of property is not grounds for attachment'" (Corsi, 37 AD3d at 397, quoting Computer Strategies v Commodore Bus. Machs., 105 AD2d 167, 173 [1984]; accord Mitchell v Fidelity Borrowing LLC, 34 AD3d 366, 366-367 [2006]).
As is also of particular relevance in the instant case, "[t]he moving papers must contain evidentiary facts, as opposed to conclusions, proving the fraud" (Benedict v Browne, 289 AD2d 433, 433 [2001], citing Arzu v Arzu, 190 AD2d 87, 91 [1993], Societe Generale Alsacienne De Banque, Zurich v Flemingdon Dev., 118 AD2d 769, 772 [1986]; accord Laco X-Ray Sys. v Fingerhut, 88 AD2d 425, 429 [1982], lv denied 88 AD2d 425 [1983] [fraud cannot be inferred; it must be proved]). It has also been held that " [t]he fact that the affidavits in support of an attachment contain allegations raising a suspicion [*6]of an intent to defraud is not enough'" (Mitchell, 34 AD3d at 366-367, quoting Rosenthal v Rochester Button Co., 148 AD2d 375, 376 [1989]).

Applying these general principles of law to the facts of this case, defendants have made a prima facie showing that plaintiff could not have obtained a pre-judgment order of attachment in the Personal Injury Action. Plaintiff does not refute this showing. Most significantly, in support of his position, plaintiff relies solely upon the fact that Mr. George transferred his properties prior to entry of the judgment. As discussed above, the fact that a defendant transfers property, standing alone, is insufficient to establish fraud (see Mitchell, 34 AD3d at 366-367; Corsi, 37 AD3d at 397; Computer Strategies, 105 AD2d at 173). Plaintiff offers no other evidentiary basis upon which this court can find an intent to defraud on the part of Mr. George (see Benedict, 289 AD2d at 433, Societe Generale Alsacienne De Banque, Zurich, 118 AD2d at 772; Laco X-Ray Sys., 88 AD2d at 429). Thus, in the absence of raising a question of fact with regard to whether the court would have granted a pre-judgment attachment in the Personal Injury Action, it is irrelevant whether defendants made an oral application or submitted a motion on papers.

Lis Pendens

CPLR 6501 provides, in relevant part, that "[a] notice of pendency may be filed in any action in a court of the state or of the United States in which the judgment demanded would affect the title to, or the possession, use or enjoyment of, real property."

"[B]ecause of the powerful impact that this device has on the alienability of property,' together with the facility with which it may be obtained,' the courts have applied a narrow interpretation in reviewing whether an action is one affecting the title to, or the possession, use or enjoyment of, real property."


(Shkolnik v Krutoy, 32 AD3d 536, 537 [2006], quoting 5303 Realty Corp. v O & Y Equity Corp., 64 NY2d 313, 315-316, 321 [1984]). Thus, it is well settled that "[a] notice of pendency is not available where a plaintiff claims no right, title or interest in the property itself" (Long Island City Sav. & Loan Asso. v Gottlieb, 90 AD2d 766 [1982], mod on other grounds 58 NY2d 931 [1983]; see also Khanal v Sheldon, 55 AD3d 684, 686 [2008], lv denied 12 NY3d 714 [2009] [notice of pendency should be cancelled where plaintiff asserted only a claim for money, not a right, title, or interest in the property itself]).
Applying these general principles of law to the facts of this case, defendants have also made a prima facie showing that plaintiff could not have obtained a pre-judgment order of attachment in the Personal Injury Action. Again, plaintiff does not refute this showing, since it is clear that plaintiff was seeking money damages in the Personal Injury Action, so that his action clearly did not "affect the title to, or the possession, use or enjoyment of, real property." Accordingly, plaintiff fails to establish that defendants were [*7]negligent in not filing a lis pendens in the Personal Injury Action. "

 

 

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A Blow by Blow Description of Overbilling and Padding by an Attorney

What happens when a non-English speaking, novice litigant goes to an attorney for a simple issue to be resolved, and ends up, years later, paying $ 90,000?  What usually happens is that the client goes off unhappy.  Here in Law Off. of Thaniel J. Beinert v Litinskaya   2014 NY Slip Op 50504(U)
Decided on March 31, 2014  Civil Court Of The City Of New York, Kings County Thompson, J. we see just the opposite.  Attorney is told that no fees are due, and that he has to refund money. The decision is very long, and very descriptive.  It's worth reading through.
 

"On October 17, 2003, the Hon. Ellen L. Koblitz, the presiding judge over the above action, dismissed the Defendant's answer and his supporting defenses, and granted LITINSKAYA a Final Judgment of Divorce. The Final Judgment of Divorce, subsequently subsumed by an Amended Final Judgment of Divorce, in addition to the resolution of issues of equitable distribution, child support, and visitation, provides, in relevant part, as follows: "Plaintiff shall receive all title and interest in the condominium located at 4050 Nostrand Avenue, Apartment PH-C, Brooklyn, New York and Judgment is (sic) hereby entered in her favor " (See Exhibit "A" in the BRIEF IN SUPPORT OF PLAINTIFF'S MOTION FOR CERTIFICATION UNDER CPLR §2105-Court Exhibit "1"). The Superior Court appointed Richard Weiner, Esq., attorney-in-fact, to execute and file the New York State Deed and the other recording documents mandated by NY law to complete the transfer of the property to LITINSKAYA. It is irrefutable and undeniable that the deficiency in the aforementioned legal description of the property in the decree is the catalyst for the controversy in this case. "

"In this action, the first course of action for the Plaintiff law firm should have been to communicate with the attorney that handled the divorce action in New Jersey. Although Plaintiff did testify that he spoke to her and obtained her file, he never made any inquiry about the exclusion of the lease agreement or leasehold interest in the divorce decree. Any real estate attorney would have made a determination of any and all liens, tenancies, leases, encumbrances, claims, actions and exceptions to title that were subject to the transfer of the condominium to the Defendant. It is this court's opinion that the divorce attorney assumed responsibility for all rights, title and interest that the Defendant may have had in the subject property including any leases that may have been made subject of the transfer. But for the neglectful exclusion of such qualifying language in the transfer of this real estate located in Brooklyn, New York, the entire course of litigation undertaken by the Plaintiff's attorney would have been different or even non-existent.

Of equal importance, it is the opinion of this court that the course of action in the prosecution of the Defendant's right in the New Jersey Circuit Court was unreasonable and not in conformity with the Rule 1.1 of the Professional Rules. This court finds that the course of action in attempting to modify and/or declare the alleged lease agreement null and void was improper as a matter of fact and law.

The proper course of action would have been to commence a summary proceeding to recover possession of the subject apartment. The Housing Part of the Civil Court of the City of New York has been clearly granted statutory authority pursuant to RPAPL §235-c to declare the alleged twelve (12) year lease agreement at a monthly rent of $590.00 for the duplex Penthouse in Brooklyn unconscionable. RPAPL §235-c provides, in relevant part, as follows: "If the court, as a matter of law, finds a lease or any clause of the lease to have been unconscionable at the time it was made, the court may refuse to enforce the lease, or it may enforce the remainder of the lease without the [*14]unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result". As compelling, Section 2 of the statute provides that when it is claimed or appears to the court that the lease or any clause thereof may be unconscionable, the parties shall be afforded a reasonable opportunity to present evidence as to its setting, purpose and effect to aid the court in making the determination. This is not a new statute. It is well known to those attorneys that practice Landlord and Tenant law. The statute was enacted in 1976, effective July 26, 1976, and is applicable to all leases regardless of when executed in this state. No evidence, testimonial or otherwise, was introduced to show that BEINERT retained or consulted a Landlord and Tenant attorney notwithstanding the fact that he stated he was a veteran in the Landlord and Tenant Court. Even those that are experts consult with others in decision-making particularly in the legal profession.

This court is in accord with the Defendant's claims that the proper venue to remove the tenants from possession was the Brooklyn Housing Part of the Civil Court of the City of New York and not the Superior Court in New Jersey. The Hon. Ellen L. Koblitz correctly instructed the Plaintiff law firm that the appropriate venue was New York based upon the fact that the property was located in New York, the occupants were residents of New York and were not parties to the divorce action. The judge was explicit that the tenants, in light of the evidence presented by both parties, may have some rights to occupancy.

Under New York law, both parties would have been given an opportunity to participate in an evidentiary hearing to determine the validity of the lease. LITINSKAYA could have presented expert testimony of a real estate broker and/or real estate appraiser to substantiate that the rental amount was a "sweetheart deal" and well below the fair market value for a comparable apartment of that size, condition and location. Of equal importance, LITINSKAYA would have been offered the opportunity to present evidence to prove that the sum of $590.00 did not reflect the fair market rent for the subject premises and that such a low rental was due to the prior ownership of the subject premises by the Defendant's former spouse. Evidence should have also been adduced to substantiate, as alleged by the Plaintiff law firm in the New Jersey Order to Show Cause, that the lease was intended to defeat LITINSKAYA's rights of possession contrary to the divorce decree. On the other side, the occupants would have been granted the statutory right to defend the lease, including but not limited to, the memorandum of lease dated March 25, 2003 that was sent to the title company for recordation, the lease itself and any other admissible evidence, testimonial or documentary, to substantiate its authenticity and its enforceability."

 

"In addition to all of the above, this court finds it a deviation from traditional and customary legal practices for BEINERT to have his junior associate act as trial counsel in this case. As the presiding judge in many legal fee cases and trial counsel in many more cases of like substance, it is customary in the legal community for the Plaintiff to retain outside counsel in cases such as this one. In many instances, those outside counselors have an ongoing relationship with the law firm; many act, of counsel, on behalf of the firm as trial counsel or specialize in areas unfamiliar to the law firm. The trial transcript in this case speaks volumes of imprudence, inexperience and developing trial skills. It is apparent that no one, not even the managing partner, consulted with outside counsel to discern the requisite elements to prove a legal fee dispute case. Had such action been taken, maybe this action would have been avoided altogether. This court was remorseful that a young associate was obligated to act as trial counsel for his employer in this legal fee case. This court would discourage such uncustomary and irresponsible practice.

Based on the above analysis, the legal fees are reduced as stated in the annexed Schedule "A" and are based on these grounds. Any and all teleconference bills with "ALEX" are disallowed. According to the testimony of the principal of the law office, ALEX was a former client who introduced the parties, however, the Defendant retained the law firm. Since ALEX is not the party that retained the law firm and no evidence was produced that he had a Power of Attorney to act on behalf of the Defendant or any testimony that the Defendant authorized him to act on her behalf, all bills to the Defendant which state "teleconference with Alex" or the like are denied.

In addition, any and all bills that lacked specificity and were too generalized to disclose the nature and scope of the legal services rendered, are likewise disallowed. The bills, as described in Schedule "A" that are disallowed is replicated verbatim from the BEINERT legal fee bills. BEINERT also did not annexed to the bills or present to the court for review, any schedule of the names of the different employees that worked on the case. At the very least the Defendant should have known the name(s) and rank of the individual that billed for services.

After a careful review and complete analysis of the trial transcript and documentary evidence admitted at trial, the Plaintiff law firm failed to substantiate entitlement to the legal fees billed the Defendant. "

 

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A Medical Malpractice Loss, A Legal Malpractice Win

A frequent scenario in medical malpractice litigation is the attorney or firm that takes on a case, assures the client that it has merit, obtains a certificate of merit to file the complaint, goes through discovery, and then fails to hire an expert.  At that point the law firm asks to be relieved, and often that motion is granted.  Whether the reason is that the law firm does not wish to pay the expensive expert fee, or simply wants to settle, but not try cases, is unknown.  What is known is that many a plaintiff has been left high and dry.  When the law firm seeks to get out early enough they are usually allowed to do so.  Here, not so much.

Snyder v Brown Chiari, LLP   2014 NY Slip Op 02363   Decided on April 3, 2014   Appellate Division, Third Department
"In late 2002, plaintiff underwent a surgical procedure and shortly thereafter developed complications that resulted in three further surgeries, none of which was successful. She retained defendants, which commenced a medical malpractice action in March 2004 against the physician who had performed the initial surgery as well as that physician's partnership. In late February 2007, and with a trial date scheduled for early March 2007, defendants attempted to withdraw as counsel to plaintiff because, among other things, an expert had not been retained. Supreme Court (Falvey, J.) denied defendants' motion to withdraw as counsel to plaintiff, granted a motion by the defendants in the medical malpractice action to preclude plaintiff from offering expert testimony at trial and, because a prima facie case could not be established without expert proof, dismissed the medical malpractice action. When plaintiff attempted to obtain her file from defendants, Supreme Court permitted a lien for defendants' disbursements of $7,500.45. "

"Plaintiff stated a cause of action for legal malpractice. Elements of such a cause of action include "establish[ing] both that the defendant attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession which results in actual damages to a plaintiff, and that the plaintiff would have succeeded on the merits of the underlying action 'but for' the attorney's negligence" (AmBase Corp. v Davis Polk & Wardwell, 8 NY3d 428, 434 [2007] [internal citations omitted]; accord Alaimo v McGeorge, 69 AD3d 1032, 1034 [2010])."

"Here, plaintiff submitted, among other things, an affidavit and attached memorandum from a physician licensed in New York. This physician had been consulted by defendants in 2003, and he produced his memorandum from such time which set forth in ample detail for purposes of opposing a motion to dismiss that plaintiff's surgeon deviated from appropriate care. His affidavit reaffirmed that he believed there was malpractice in the treatment of plaintiff by her surgeon and, further, stated that he had been available to testify at the scheduled 2007 trial, but was never contacted by defendants. Such proof, together with the detailed allegations in the complaint, state a cause of action. "

 

 

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Fee Disputes and Legal Malpractice

CLE speakers constantly tell the attendant attorneys that fee disputes against their client will trigger a legal malpractice claim.  Insurers ask whether attorneys sue for or have sued for a fee in the recent past.  They too must be worrying about a retaliatory legal malpractice suit.  It seems that Wagner Davis P.C. v Gargano  2014 NY Slip Op 02247  Decided on April 1, 2014  Appellate Division, First Department is the poster child for this advice.  Put another way, client did not want to pay the $ 56,000+ fee, which was too large for arbitration.  Legal malpractice, unsuccessfully, followed.

"In this action for unpaid legal fees, defendants asserted a counterclaim for legal malpractice alleging that they would have prevailed on a motion for a preliminary injunction in the underlying action commenced by defendants against their neighbors over a retaining wall between their properties, if it had been made earlier by plaintiff. However, defendants failed to establish that they would have been successful on the motion absent counsel's delay (see Warshaw Burstein Cohen Schlesinger & Kuh, LLP v Longmire, 106 AD3d 536, 536 [1st Dept 2013], lv dismissed 21 NY3d 1059 [2013]). In any event, plaintiff's delay while a new expert prepared a report on the challenged retaining wall, was a reasonable strategic decision that cannot form the basis of a malpractice claim (Morrison Cohen Singer & Weinstein v Zuker, 203 AD2d 119, 119 [1st Dept 1994]).

Defendants' contention that the claims for fees should not have been granted due to plaintiff's failure to comply with the rules on fee arbitration is unavailing. The complaint expressly states that the amount of damages sought is $56,943.25, which is beyond the maximum amount covered by the Fee Dispute Resolution Program (see 22 NYCRR 137.1[b][2]; Kerner & Kerner v Dunham, 46 AD3d 372 [1st Dept 2007]). Although defendants' arguments regarding [*2]the amount of the fees were deferred to an evidentiary hearing, the motion court properly declined to consider the un-notarized, out of state report of defendants' expert (see CPLR 2309; CPLR 2106).

 

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It's Definite! The Statute of Limitations for Judiciary Law 487 is 6 years

Judge Read has written the second earth shifting opinion on Judicary Law 487.  As she writes, "Judiciary Law § 487 exposes an attorney who "[i]s guilty of any deceit or collusion, or consents to any deceit or collusion, with intent to deceive the court or any party" to criminal (misdemeanor) liability and treble damages, to be recovered by the injured party in a civil action.

Her first opinion in the area was the very important Amalfitano v Rosenberg , 2009 NY Slip Op 01069 [12 NY3d 8]  February 12, 2009  Read, J.  Court of Appeals.  She reviewed the history of the statute: "As the District Court correctly observed, however, Judiciary Law § 487 does not derive from common-law fraud. Instead, as the Amalfitanos point out, section 487 descends from the first Statute of Westminster, which was adopted by the Parliament summoned by King Edward I of England in 1275. The relevant provision of that statute specified that

"if any Serjeant, Pleader, or other, do any manner of Deceit or Collusion in the King's Court, or consent [unto it,] in deceit of the Court [or] to beguile the Court, or the Party, and thereof be attainted, he shall be imprisoned for a Year and a Day, [*3]and from thenceforth shall not be heard to plead in [that] Court for any Man; and if he be no Pleader, he shall be imprisoned in like manner by the Space of a Year and a Day at least; and if the Trespass require greater Punishment, it shall be at the King's Pleasure" (3 Edw, ch 29; see generally Thomas Pitt Taswell-Langmead, English Constitutional History, at 153-154 [Theodore F.T. Plucknett ed, Sweet & Maxwell, 10th ed 1946]).
Five centuries later, in 1787, the Legislature adopted a law with strikingly similar language, and added an award of treble damages, as follows:

"And be it further enacted . . . [t]hat if any counsellor, attorney, solicitor, pleader, advocate, proctor, or other, do any manner of deceit or collusion, in any court of justice, or consent unto it in deceit of the court, or to beguile the court or the party, and thereof be convicted, he shall be punished by fine and imprisonment and shall moreover pay to the party grieved, treble damages, and costs of suit" (L 1787, ch 35, § 5).
In 1830, the Legislature carried forward virtually identical language in the Revised Statutes of New York, prescribing that

"[a]ny counsellor, attorney or solicitor, who shall be guilty of any deceit or collusion, or shall consent to any deceit or collusion, with intent to deceive the court or any party, shall be deemed guilty of a misdemeanor, and on conviction shall be punished by fine or imprisonment, or both, at the discretion of the court. He shall also forfeit to the party injured by his deceit or collusion, treble damages, to be{**12 NY3d at 13} recovered in a civil action" (2 Rev Stat of NY, part III, ch III, tit II, art 3, § 69, at 215-216 [2d ed 1836])."
 

Today, she wrote the opinion that decides the statute of limitations for Judicary Law 487 in Melcher v Greenberg Traurig, LLP   2014 NY Slip Op 02213   Decided on April 1, 2014   Court of Appeals
Read, J.  QuotingCardozo  in Beers v. Hotchkiss, as well as explaining how the common law of the United States started:

"Melcher points out that English statutory and common law became New York common law as part of the Colonial-era incorporation or "reception" of English law into New York law. As explained in Bogardus v Trinity Church (4 Paige Ch 178, 198 [1833]), 

"[t]he common law of the mother country as modified by positive enactments, together with the statute laws which are in force at the time of the emigration of the colonists, become in fact the common law rather than the common and statute law of the colony. The statute law of the mother country, therefore, when introduced into the colony of New-York, by common consent, because it was applicable to the colonists in their new situation, and not by legislative enactment, became a part of the common law of this province" (see also Beers v Hotchkiss, 256 NY 41, 54 [1931, Cardozo, C.J.] ["(T)he statutes of the mother country in existence at the settlement of a colony . . . are deemed to have entered into the fabric of the common law, and like the common law itself became law in the colony unless unsuited to the new conditions"] [emphasis added])."

Wow! 
 

 

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The Documents Are Insufficient...But the Case is Still Dismissed

Motions to dismiss under CPLR 3211 generally start with an (a)(7) motion and then continue with an (a)(1) motion.  Sometimes there is a statute of limitations or more esoteric argument to be made.  In Citidress II Corp. v Tokayer   2013 NY Slip Op 02369 [105 AD3d 798]   April 10, 2013
Appellate Division, Second Department  the Appellate Division gave plaintiff some faint hope in the first paragraph, and then took it all away in the second.  Documents insufficient.  However, too much speculation.
 

"The Supreme Court should not have directed the dismissal of the causes of action based on legal malpractice and breach of contract pursuant to CPLR 3211 (a) (1). The documentary evidence submitted did not resolve all factual issues as a matter of law, and did not conclusively dispose of the claims asserted by the plaintiff (see Beal Sav. Bank v Sommer, 8 NY3d 318, 324 [2007]; AG Capital Funding Partners, L.P. v State St. Bank & Trust Co., 5 NY3d 582, 590-591 [2005]; McCue v County of Westchester, 18 AD3d 830, 831 [2005]).

However, the Supreme Court properly determined that the complaint failed to state a cause of action. Speculative contentions about what might have happened had the defendant attorney (hereinafter the defendant) taken a different approach in litigating a case on behalf of the plaintiff were not sufficient to support the plaintiff's allegations of legal malpractice (see Humbert v Allen, 89 AD3d 804 [2011]; Dempster v Liotti, 86 AD3d 169, 180 [2011]; Wald v Berwitz, 62 AD3d 786 [2009]). Since the plaintiff failed to plead specific facts showing causation and damages, its claims of legal malpractice failed to state a cause of action (see Kuzmin v Nevsky, 74 AD3d 896, 898 [2010]; Tortura v Sullivan Papain Block McGrath & Cannavo, P.C., 21 AD3d 1082, 1083 [2005]). Moreover, the claims alleging breach of contract also failed to state a cause of action. These claims are duplicative of the legal malpractice cause of action because they arise from the same facts as those underlying the legal malpractice cause of action, and do not allege distinct damages (see Soni v Pryor, 102 AD3d 856 [2013]; Ofman v Katz, 89 AD3d 909, 911 [2011]). "

 

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Big Firms, Big Case, Big Headache

The business of legal representation in real estate transactions has buoyed law firms since the Magna Carta.  It is not a completely carefree practice, as Haberman v Xander Corp.  2012 NY Slip Op 31645(U)  June 11, 2012  Sup Ct, Nassau County  Docket Number: 021508/10  Judge: Randy Sue Marber demonstrates:

"It appears from the Third-Party complaint that in or about October 2002, the  Third-Part Defendant, Michael Zapson and later the Defendant, DMH, was retained by the Defendant/Third-Party Plaintiff, Xander, to represent it in connection with a legal matter relating to a parcel of real property known as 350 Shore Road, Long Beach, New York owned by the Plaintiffs herein and located adjacent to the west of real property known as 360 Shore Road owned by the Defendant/Third-Part Plaintiff, Xander. The Plaintiffs, Sinclair Haberman and Belair Building, LLC (Haberman/Belair) were the developers of the property on which several multiple dwelling buildings were to be constructed over several years. After all of the units in Xander s building (Tower A " ), the first to be constructed, located at 360 Shore Road, had been sold, the Plaintiffs, Haberman/Belair, sought to develop the adjacent property where they proposed to construct Tower "B " The building permit issued on August 12 2003, permitting construction of the second building was, however, revoked by decision of the Zoning Board of Appeals of the City of Long Beach dated December 29 2003.

In or about September 2003, the Third-Part Defendants, on behalf of the Defendant/Third-Party Plaintiff, Xander, filed a Petition (bearing Index No. 014069/03) to determine title by adverse possession to, and/or a prescriptive easement over, part of 350 Shore Road for the purpose inter alia of preserving the parking plan of 360 Shore Road. The litigation, which continued for seven years, culminated in a bench trial which resulted in dismissal of Xander's Petition by order of the Hon. William R. LaMarca entered January 15, 2010.

As a consequence of that dismissal, the Plaintiffs, Haberman/Belair commenced this action against the Defendant, Xander, and its board members alleging that because of the preliminary injunction obtained by Xander , the Plaintiffs were wrongfully prevented from proceeding with construction of Tower "B" at 350 Shore Road. The Plaintiffs allege that the adverse possession action prosecuted by Xander constituted malicious prosecution for which they seek to recover damages as well as the amount of the undertaking.

Inasmuch as the relief sought in the counterclaim asserted by Xander in the action (Index No. 002496/10), before the Hon. Antonio Brandveen  damages in an amount to be determined at trial to recoup part of the attorneys' fees it has already paid as a result of Plaintiff DMH's' s conduct" is different from the indemnification and/or contribution claims Xander asserts in the amended Third-Part complaint in this action, there is no basis  to dismiss the Third-Part complaint on CPLR ~ 3211 (a) (4) grounds as there are not two action(s) pending between the same parties for the same cause of action in a court of any state or the United States. Nor was there any basis to order consolidation of the two actions. A motion for joint trial pursuant to CPLR  602 ( a) rests in the sound discretion of the court. Nationwide Assoc. v. Targee St. Internal Med Group, P. 286 A.D 2d 717,718 (2d Dept. 2001). Where common questions of law or fact exist , a motion to consolidate
or for a joint trial pursuant to CPLR 602 (a) will be granted absent a showing of prejudice  to a substantial right of the part opposing the motion. Whitman v. Parsons Transp. Group of NY, Inc. 72 A. 3d 677 678 (2d Dept. 2010). The court finds no basis, equitable or otherwise, that the claim by the Defendant/Third-Party Xander's former attorneys for unpaid counsel fees for services rendered, settled on June 1 2012, should have been delayed or resolved in the context of the malicious prosecution claim in which the Defendant/Third-Part Plaintiff, Xander, seeks contribution and indemnification for any damages the Plaintiff, Haberman/Belair , may recover against it in this action."

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What That Stipulation Actually Means

A stipulation to answer or respond to a complaint covers a motion to dismiss as well as any other possible "response."  So the pro-se plaintiff found in Bob v Cohen   2013 NY Slip Op 02499 [105 AD3d 530]   April 16, 2013   Appellate Division, First Department.  After defendants were permitted to move to dismiss, the AD then affirmed dismissal because the Workers' Compensation Board awarded legal fees to the law firm.  Under these circumstances, case over.

 "Defendants' motion to dismiss was not untimely, as found by the motion court, since the parties had stipulated, both orally and in writing, to extend defendants' time to "respond" to the complaint to January 31, 2011, and defendants had served and filed their motion to dismiss by that date (see DiIorio v Antonelli, 240 AD2d 537 [2d Dept 1997]; Del Valle v Office of Dist. Attorney of Bronx County, 215 AD2d 258 [1st Dept 1995]; CPLR 320 [a]; 3211 [e]; compare McGee v Dunn, 75 AD3d 624, 625 [2d Dept 2010]). On the merits, defendants were entitled to dismissal of this legal malpractice action commenced by their former client on res judicata grounds. The Workers' Compensation Board's award of legal fees to defendants, imposed as a lien against the ultimate award of compensation to plaintiff (see Workers' Compensation Law § 24), precludes plaintiff's present claim that defendants represented him negligently, a claim that could have been raised in opposition to defendants' fee application (see e.g. Lusk v Weinstein, 85 AD3d 445 [1st Dept 2011], lv denied 17 NY3d 709 [2011]; Zito v Fischbein Badillo Wagner Harding, 80 AD3d 520 [1st Dept 2011]). "
 

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The Professionals Duke It Out in Legal Malpractice

This case illustrates what happens when defendants and third-parties are fighting, while plaintiff remains on the sidelines, enjoying a brief respite.  When this happens in a legal malpractice case, the spectacle of legal malpractice defense firm arguing with a legal malpractice defense firm over technical dismissals is a touch ironic.

Balkheimer v Spanton  2013 NY Slip Op 00715 [103 AD3d 603]  Appellate Division, Second Department   is one such example.  

"In an action to recover damages for legal malpractice, the third-party defendants appeal from an order of the Supreme Court, Suffolk County (Tanenbaum, J.), dated December 9, 2011, which denied their motion pursuant to CPLR 3211 (a) (5) and (7) to dismiss the third-party complaint.

Ordered that the order is reversed, on the law, with costs, and the motion of the third-party defendants pursuant to CPLR 3211 (a) (5) and (7) to dismiss the third-party complaint is granted.

Pursuant to General Obligations Law § 15-108 (b), "[a] release given in good faith by the injured person to one tortfeasor as provided in [General Obligations Law § 15-108 (a)] relieves him [or her] from liability to any other person for contribution as provided in article fourteen of the civil practice law and rules." Here, the plaintiffs executed a general release in favor of the third-party defendants. There is no indication in the record that the release was not executed in good faith. Therefore, pursuant to General Obligations Law § 15-108 (b), the third-party defendants are relieved from liability to the third-party plaintiffs for contribution (see Ziviello v O'Boyle, 90 AD3d 916, 917 [2011]; Kagan v Jacobs, 260 AD2d 442 [1999]). Accordingly, the Supreme Court should have granted that branch of the motion of the third-party defendants which was pursuant to CPLR 3211 (a) (5) to dismiss the contribution cause of action in the third-party complaint as barred by the release.

Here, the third-party complaint does not allege the existence of any duty owed by the third-party defendants to the third-party plaintiffs (see Raquet v Braun, 90 NY2d at 183; Breen v Law Off. of Bruce A. Barket, P.C., 52 AD3d 635, 638 [2008]; Keeley v Tracy, 301 AD2d 502, 503 [2003]). Furthermore, the third-party plaintiffs would not be compelled to pay damages for the alleged negligent acts of the third-party defendants (see Lovino, Inc. v Lavallee Law Offs., 96 AD3d at 910; Jakobleff v Cerrato, Sweeney & Cohn, 97 AD2d 786, 786-787 [1983]). Accordingly, the Supreme Court should have granted that branch of the motion of the third-party defendants which was pursuant to CPLR 3211 (a) (7) to dismiss the common-law indemnification cause of action in the third-party complaint."

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Overbilling, Harassment and Legal Malpractice

The Appellate Division, First Department writes a short and pungent decision on an overbilling case.  In Chowaiki & Co. Fine Art Ltd. v Lacher   2014 NY Slip Op 01992   Decided on March 25, 2014   Appellate Division, First Department dismissal of certain of the claims are affirmed, and some are permitted to continue.  Unjust enrichment in addition to breach of contract remain, and plaintiff is not required to elect.  From the decision:
 

"In this action arising from defendant attorney and his law firm's representation of plaintiffs in an action brought against them by a former employee, plaintiffs allege that they were excessively billed for services rendered, and that they were harassed, threatened and coerced into paying the excessive and overinflated fees. The motion court properly dismissed plaintiffs' claim for breach of fiduciary duty as duplicative of the breach of contract claim, since the claims are premised upon the same facts and seek identical damages, return of the excessive fees paid (see CMMF, LLC v J.P. Morgan Inv. Mgt. Inc., 78 AD3d 562 [1st Dept 2010]; cf. Ulico Cas. Co. v Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d 1 [1st Dept 2008]). Although plaintiffs sufficiently allege an independent duty owed to them, arising from the attorney-client relationship, the fraud claim is similarly redundant of the breach of contract claim, since it also seeks the same damages (see Coppola v Applied Elec. Corp., 288 AD2d 41, 42 [1st Dept 2001]; Makastchian v Oxford Health Plans, 270 AD2d 25, 27 [1st Dept 2000]).

However, we find that, as a dispute exists as to the application of the retainer agreement as to defendant, plaintiffs need not elect their remedies and may pursue a quasi-contractual claim for unjust enrichment, as an alternative claim (see Wilmoth v Sandor, 259 AD2d 252, 254 [1st Dept 1999]).

The cause of action based upon Judiciary Law § 487 was properly dismissed since relief under this statute is not lightly given and the conduct alleged does not establish the existence of a chronic and/or extreme pattern of legal delinquency which caused damages (see Kaminsky v Herrick, Feinstein LLP, 59 AD3d 1, 13 [1st Dept 2008], lv denied 12 NY3d 715 [2009]; Nason v Fisher, 36 AD3d 486, 487 [1st Dept 2007]). [*2]

Plaintiffs' claims of excessive billing and related conduct, which actions are not alleged to have adversely affected their claims or defenses in the underlying action, do not state a claim for legal malpractice (see e.g. AmBase Corp. v Davis, Polk & Wardwell, 8 NY3d 428, 434 [2007]). "

 

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A House Sale Goes Wrong. Was the Attorney to Blame?

We've recently reported on a legal malpractice in a  $25 Million real estate project, as well as in a $ 40 Million re-insurance deal.  Here, plaintiff feels no less stung in a single house real estate transaction gone bad.  Was the attorney to blame?  So far the case avoided dismissal under CPLR 3211.  Whether it will ever go to trial is a different question.

Arias v Arbelaez   2014 NY Slip Op 50428(U)   Decided on March 17, 2014   Supreme Court, Queens County   McDonald, J. we see some sophisticated and unsophisticated people fooling around with real estate and mortgages.  
 

"According to the supplemental summons and amended verified complaint, filed on October 3, 2013, the plaintiff, Amparo Arias, was approached by defendant, Jorge E. Arbelaez, with respect to purchasing the subject premises, a residential property located at 250-02, 87th Avenue, Bellerose, New York. Plaintiff alleges that on December 17, 2011, she entered into a written "Acquisition Agreement" with Arbelaez whereby plaintiff would provide the necessary funds to acquire the property, and Arbelaez would handle the administrative process. The agreement stated that each party would be a 50% owner of a corporation known as "THREE A'S 250-02 LLC" formed to hold title of the premises and the corporation would hold the title in trust for the benefit of the plaintiff with title to ultimately pass to the plaintiff as the equitable owner on a future date. In order to acquire the premises, the buyer, THREE A'S 250-02 LLC, was to assume four separate mortgages totaling $550,000 and plaintiff would put up $50,000 for the acquisition of the property. The complaint states that defendant Hector Marichal represented the plaintiff, defendant Arbelaez, and the corporation in the acquisition of the premises.

Plaintiff alleges that she paid $50,000, a portion of which went to Arbelaez and a portion to Hector Marichal, as attorney, to cover the costs of acquiring the premises. On March 2, 2012 the corporation was taking title to the property subject to the four mortgages. Plaintiff claims that subsequent to the purchase she expended an additional $60,000 to settle and satisfy three existing mortgages on the property. Plaintiff claims that in March 2013 defendants Arbelaez and Marichal did not remit any of the monies she paid towards the first mortgage and as a result the property is in foreclosure. In addition, plaintiff contends that she did not receive marketable title in her name nor has she received any of the corporate documents for Three A's 25-02 LLC after repeated requests.
 

Plaintiff asserts causes of action for a constructive trust asserting that the plaintiff is the equitable owner of the property and that nominal title was taken in the name of the corporation on behalf of the plaintiff and that despite her investment of $110,000 defendants have refused to reconvey title to the plaintiff. Plaintiff alleges that as a result, the defendants will be unjustly enriched if the premises are [*3]permitted to remain as presently titled.

With respect to defendant Hector Marichal, the complaint alleges that he was part of a conspiracy with the other defendants in which they had a preconceived intention not to honor their obligations to plaintiff but rather to secure their business interests for their own benefit. Therefore, plaintiff asserts causes of action against Hector Marichal for fraud, breach of fiduciary duty, breach of contract and legal malpractice. Plaintiff asserts in this regard that Marichal had no intention of fully representing plaintiff in the transaction and induced the plaintiff to transfer at least $110,000 to defendant as legal fees and acquisition costs. Counsel alleges that Marichal breached his legal and contractual duties to the plaintiff by engaging in fraudulent and deceitful conduct, failing to deliver marketable title, failing to inform plaintiff that the premises was in foreclosure prior to the purchase, and failing to disclose his conflict of interest with the seller, Ramirez.
 

Here, accepting the allegations in the complaint as true, according the plaintiff the benefit of every favorable inference, and determining only whether the allegations fit within any cognizable legal theory (see DeSandolo v United Airlines Inc., 71 AD3d 1073 [2d Dept.2010]; AG Capital Funding Partners, L.P. v State St. Bank & Trust Co., 5 NY3d 58 [2005]), this Court finds that the plaintiff has sufficiently stated a cause of action for fraud, legal malpractice and breach of fiduciary duty against Marichal. In the early stages of litigation such as the pre-discovery stage, "plaintiffs are entitled to the most favorable inferences, including inferences arising from the positions and responsibilities of defendants," and "plaintiffs need only set forth sufficient information to apprise defendants of the alleged wrongs" (DDJ Mgt., LLC v Rhone Group L.L.C., 78 AD3d 442 [1st Dept. 2010]; also see Selechnik v Law Off. of Howard R. Birnbach, 82 AD3d 1077 [2d Dept. 2011).
 

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When May One Begin a Legal Malpractice Case?

A persistent problem in legal malpractice (and in accounting malpractice) cases is the delayed damages issue.  Put simply, attorney advises on how to accomplish a goal and prepares papers on January 2.  Client uses the advice and paperwork to start a process and the other side resists.  Litigation ensues and 4 years later the other side wins.  When does the statute of limitations end?

For the most part, the rule is that the statute of limitations commences on the day the negligent advice is given, and is extended only by continuous representation.  This is true, even though no damages existed until the other side won, a year after the statute ran,

in XE Partners, LLC v Skadden Arps Slate Meagher &  Flom LLP    2014 NY Slip Op 30668(U)
March 6, 2014  Sup Ct, New York County  Docket Number: 152994/2013  Judge: Eileen Bransten we see this issue:

"Under New York law, "[i]t is well settled that a legal malpractice claim accrues when all the facts necessary to file the cause have occurred and the injured party can obtain relief in court.'' Creditanstalt Inv. Bank AG v. Chadbourne & Parke LLP, 14 A.D.3d 414, 415 (1st Dep't  2005). "What is important is when the malpractice was committed, not when the client discovered it." McCoy v. Feinman, 99 N.Y.2d 295, 301 (2002).


As explained by the Court of Appeals in the accounting malpractice context: "the claim accrues upon the client's receipt of the accountant's work product since this is the  point that a client reasonably relies on the accountant's skill and advice and, as a consequence of such reliance, can become liable for tax deficiencies.'' Ackerman v. Price Waterhouse, 84 N.Y.2d 53, 541 (1994). Receipt of the accountant's advice "is the time when all the facts necessary to the cause of action have occurred and an injured party can obtain relief." Id. The reasoning of Ackerman has been extended to attorney malpractice claims. For example, in Proskauer Rose Goetz & Mendelsohn LLP v. Munao, 270 A.D.2d 150 (1st Dep't 2000), the First Department cited Ackerman in holding that a client's legal malpractice counterclaims accrued when the client received defendant's purportedly
negligent work product. See id. at 151 ("The counterclaims accrued in April 1991, when plaintiff allegedly gave defendants negligent advice that they could shelter income through a certain joint venture."). The First Department likewise held in Nuzum v. Field, 106 A.D.3d 541, 541 (1st Dep't 2013), deeming legal malpractice claims brought in connection with the drafting of promissory notes time-barred where brought more than three years after the allegedly defective documents were prepared. See also Mark v. Dechert, LLP, 58 A.D.3d 553, 554 (lst Dep't 2009) ("Plaintiffs' legal
malpractice claim is barred by the statute of limitations (CPLR 214[6]), which began to run in January 2000, when the merger of the corporate plaintiffs was completed and defendant law firm filed the merger documents."). Viewed in this framework, Plaintiffs legal malpractice cause of action is clearly barred by the statute of limitations. Plaintiffs claim accrued when Defendants' allegedly negligent work product was received by Defendants. To paraphrase Ackerman, this was
the time when all the facts necessary to the cause of action occurred and when Plaintiff was able to obtain relief. Since the advice was given in 2008, Plaintiffs 2013 filing was untimely. 

In opposition, Plaintiff contends that it did not suffer an "actionable injury" until the adverse arbitral finding, and as such~ had no claim until that point. However, the First Department rejected a similar argument in Lincoln Place, LLC v. RVP Consulting, Inc.,  70 A.D.3d 594 (1st Dep't 2010), dismissing a claim asserting legal malpractice in the drafting of a lease assignment as time-barred where the claim was brought five years after lease assignment was executed. While the plaintiff-client argued that its claim did not accrue until it was found liable for outstanding rent due to the faulty assignment, the First Department held otherwise, stating that the collateral adjudication "was not a prerequisite to the existence of an actionable injury." Id. at 594. Likewise here, the resolution of the arbitration was not a prerequisite to a pleading of"actionable injury" by XE Partners. Accordingly, Plaintiffs claim did not accrue after the arbitration ruling in 2010; instead,
consistent with Ackerman, such claim accrued when the legal advice was received. Plaintiff cites to a Second Department case, Frederick v. Meighan, 75 A.D2d 528 (2d Dep't 20l0) for the contrary proposition. Even accepting Plaintiffs reading of Frederick as correct for the sake of argument, this reading is in conflict with Ackerman and its First Department progeny and therefore is not controlling.

Thus, for the foregoing reasons, Defendants' motion to dismiss is granted on statute of limitations grounds.

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3 Lessons to Learn From This Legal Malpractice Case

Milgram Thomajan & Lee, P.C. v Golden Gate Petroleum, P.C.    2014 NY Slip Op 24063   Decided on March 19, 2014   Appellate Term, First Department  teaches three lessons.  One is that a well written letter to the client during litigation warning of potential problems in choosing one course of conduct over another may sway the outcome.  The second is that strategic choices, supported by good reasons will often defeat legal malpractice claims and the third is that unpaid legal services, especially those that are recouped from a bankruptcy, can be very powerful.
 

"The action arises out of plaintiff's representation of the first-named defendant, a petroleum importer, in connection with an administrative protest of a customs duty assessment imposed on a shipment of gasoline and related chemicals. The jury's verdict, finding that plaintiff did not commit malpractice in its underlying representation of defendant, was not against the weight of the evidence. The trial evidence, fairly interpreted, supports the jury's evident rejection of defendant's contention that but for plaintiff's advice, defendant would have prevailed in the underlying customs protest, one which, the record shows, defendant elected to pursue in the face of plaintiff's frank admonition that it "may prove a tough fight, the outcome of which cannot be predicted with any certainty." The evidence, including the conflicting expert opinion testimony, permitted the jury to conclude that, in advising defendant, the lawyers of plaintiff law firm did not disregard settled law (see Darby & Darby v VSI Intl., 95 NY2d 308, 313 [2000]) and would have permitted a jury finding that the advice itself was not the proximate cause of defendant's losses (see Chadbourne & Parke, LLP v HGK Asset Mgt., Inc., 295 AD2d 208, 209 [2002]). And while defendant posits several alternative courses that plaintiff might have pursued in the underlying administrative protest, it failed to show that the tactical decisions made by the firm did not constitute "proper strategic legal decision-making" (Taylor v Paskoff & Tamber, LLP, 102 AD3d 446, 448 [2013]), or so the jury reasonably could find. Nor was the jury's consideration of the legal malpractice issue shown to have been compromised in any way [*2]by the form of the verdict sheet, particularly when that document is viewed in the context of the charge as a whole (see Plunkett v Emergency Med. Serv., 234 AD2d 162, 163 [1996]).

The record discloses no evidentiary error warranting reversal. The out-of-court statements made by defendant's (now) deceased chief financial officer were admissible under the "speaking agent" exception to the hearsay rule (see Loschiavo v Port. Auth. of New York & New Jersey, 58 NY2d 1040, 1041 [1983]). Further, in light of the voluminous evidence considered by the jury, including over 60 trial exhibits introduced by defendant, any error in the exclusion of the two documents now complained of by defendant would have been harmless (see Ramkison v New York City Hous. Auth., 209 AD2d 256, 256 [2000]).

We note finally that the court properly directed a verdict in favor of plaintiff on its main claim for unpaid legal services, a claim which, as one abandoned by plaintiff's trustee in bankruptcy, revested in plaintiff at the close of the bankruptcy proceeding (see Dynamics Corp. of Am. v Marine Midland Bank—New York, 69 NY2d 191, 195-196 [1987]; Culver v Parsons, 7 AD3d 931, 932 [2004]). "

 

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Move Quickly or Lose the Advantage in Legal Malpractice

Plaintiff sues several attorneys, and waits until nearly the end of the 120 day period to serve the summons and complaint.  Service is not complete (mailing was later) and each of the defendants has a viable CPLR 306-b defense.  One defendant moved within 60 days to dismiss and one did not.  That 60 day time period under CPLR 3211(e)  is vastly important.  As we see in Qing Dong v. Chen Mao Kao 2014 NY Slip Op 01735  Decided on March 19, 2014  Appellate Division, Second Department

"Contrary to the plaintiff's contention, service of the summons and complaint upon Chen Mao Kao and Dickman was not made within 120 days of the commencement of the action as required by CPLR 306-b. Although the summons and complaint were delivered to persons of suitable age and discretion at the actual places of business of those defendants on November 4, 2011, one day before the expiration of the 120-day period, service was not completed within that time frame because the second act required by CPLR 308(2), the mailing, was not performed within the 120-day period (see Furey v Milgrom, 44 AD2d 91, 92-93; see also Siegel, NY Prac § 72 at 120 [5th ed 2011]). Also contrary to the plaintiff's contention, considering all of the circumstances of this case, the Supreme Court providently exercised its discretion in denying her cross motion to extend the time to serve the summons and complaint upon Chen Mao Kao and Dickman, nunc pro tunc, in the interest of justice (see CPLR 306-b; Leader v Maroney, Ponzini & Spencer, 97 NY2d 95, 105-106; Khodeeva v Chi Chung Yip, 84 AD3d 1030, 1030-1031; Calloway v Wells, 79 AD3d 786, 786-787). Accordingly, the Supreme Court properly granted Dickman's motion, and properly denied the plaintiff's cross motion.

The Supreme Court also properly denied that branch of Chen Mao Kao's cross motion which was pursuant to CPLR 306-b to dismiss the complaint insofar as asserted against him. Chen Mao Kao waived his objection that he was not timely served with the summons and complaint by failing to move for judgment on that ground within 60 days after serving his answer (see CPLR 3211[e])."

 

 

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Not All Damages Are Permitted in Legal Malpractice

For policy reasons New York Courts limit the types of damages that might be awarded in legal malpractice. Basically, as the NY Court of Appeals recently reiterated, only pecuniary loss may be the subject of legal malpractice litigation. This specifically and totally leaves out any type of emotional damages. Nevertheless people suffer these injuries when their attorneys are neglectful.

White v Chelli & Bush 2013 NY Slip Op 30491(U)    Supreme Court, Richmond County Docket Number: 103745/11 Judge: Joseph J. Maltese is one such example.

"The plaintiff has been deaf since birth. After an automobile accident on or about April 16, 2007, the plaintiff retained Chelli & Bush to represent her in a personal injury litigation. According to the plaintiff’s allegations, it was communicated to the attorneys that the plaintiff would require a sign language interpreter during all phases of the litigation. On or about November 28, 2007 the law firm of Chelli & Bush commenced a personal injury action on behalf of the plaintiff captioned White v. Varsertriger, Index No. 104489/2007. The plaintiff maintains [* 1] that the defendants failed to provide sign language interpreters as requested, except for the examination before trial and the preceding preparation."

"The plaintiff’s basis for her legal malpractice claim occurs at paragraphs 63 and 64 in her
amended complaint that allege that the defendants inability to communicate with her represents a
failure to comply with an attorney’s basic ethical obligation. At paragraphs 66 and 67 the plaintiff alleges the following damages:
66. As a consequence of Defendants’ actions and inactions, White experienced feelings of frustration, helplessness and inadequacy throughout the pendency of the litigation and during settlement conferences. Thereafter, she has experienced sleep and appetite disturbances, episodes of crying, fearfulness or trepidation, and feelings of worthlessness, anxiety and depression.

67. As a consequence of Defendants’ actions and inactions,  Plaintiff has been prejudiced and suffered severe emotional distress and is entitled to compensatory damages. The Appellate Division, Second Department has made it clear that claims of damages stemming from the intentional infliction of emotional distress are not recoverable in legal malpractice actions.

“Damages in a legal malpractice case are designed ‘to make the injured client whole’ . . . A plaintiff’s damages may include ‘litigation expenses incurred in attempt to avoid, minimize, or
reduce the damage caused by the attorney’s wrongful conduct’. . .” While the Court of Appeals
has held that plaintiff may be awarded litigation expenses incurred to correct an attorney’s error,
it specifically rejected the notion that a plaintiff could be reimbursed for the expenses incurred
because of an attorney’s negligence.8 Consequently, the plaintiff’s claims for damages based on
the costs and attorney’s fees of this law suit is without merit."
 

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Judiciary Law 487? Yes. Everything Else? No.

SuccessfulJudiciary Law 487 cases are more rare than those dismissed. An attempt to deceive courts coupled with sufficiently egregious behavior is necessary.  Courts often reject plaintiff's attempts to portray attorney conduct as deceitful, finding instead that it is within normal limits.

In Cohen v Kachroo   2014 NY Slip Op 01674   Decided on March 13, 2014   Appellate Division, First Department  the Court finds that the attorneys attempted to deceive the Courts with claims that the clients just were not paying the bills.  In the past, we have seen these kind of claims to be more or less "boilerplate."  Here is what the AD said about the various claims in the case:
 

"To the extent that plaintiff seeks to allege malpractice based on a violation of the New York Rules of Professional Conduct, such an alleged violation does not, without more, support a malpractice claim (Schafrann v N.V. Famka, Inc., 14 AD3d 363 [1st Dept 2005]; see also Sumo Container Sta. v Evans, Orr Pacelli, Norton & Laffan, 278 AD2d 169, 170-171 [1st Dept 2000]). Moreover, "[t]he violation of a disciplinary rule does not, without more, generate a cause of action" (Schwartz v Olshan Grundman Frome & Rosenzweig, 302 AD2d 193, 199 [1st Dept 2003]).

Plaintiff's cause of action alleging breach of fiduciary duty is dismissed as duplicative of the legal malpractice cause of action. Contrary to plaintiff's assertion, the breach of fiduciary [*2]duty claim alleged no new facts and sought the same damages as the legal malpractice claim (Cobble Cr. Consulting, Inc. v Sichenzia Ross Friedman Ference LLP, 110 AD3d 550, 551 [1st Dept 2013]; Garnett v Fox, Horan & Camerini, LLP, 82 AD3d 435, 436 [1st Dept 2011]).

The allegations that defendants were fully paid under the terms of the retainer agreement, but falsely represented in court that they sought to be relieved because they had not been paid, suffice to allege that defendants acted with intent to deceive the respective courts (see e.g. Schindler v Issler & Schrage, 262 AD2d 226 [1st Dept 1999], lv dismissed 94 NY2d 791 [1999]). In addition, plaintiff sufficiently alleged a chronic and extreme pattern of legal delinquency by averring that defendants fabricated certain charges, attempted to extract more money than agreed upon in the retainer, and threatened to abandon the matter if plaintiff did not execute an addendum to the retainer, to defendants' benefit (see e.g. Kinberg v Opinsky, 51 AD3d 548, 549 [1st Dept 2008]). The allegedly false representations in two courts, and the coercive threats to plaintiff in an attempt to elicit additional remuneration are sufficiently egregious to state a claim for punitive damages (see Dobroshi v Bank of Am., N.A., 65 AD3d 882, 884 [1st Dept 2009], lv dismissed 14 NY3d 785 [2010]; Smith v Lightning Bolt Prods., 861 F2d 363, 372-373 [2d Cir 1988]).
 

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It's Not Scandalous to Plead A Conflict of Interest

Sometimes, but rarely a defendant will move to strike pleadings that are "scandalous and prejudicial" under CPLR 3024(b).  Sometimes it just does not work.  In those instances, as in Armstrong v Blank Rome LLP  2014 NY Slip Op 30570(U)  March 6, 2014  Sup Ct, NY County
Docket Number: 651881/2013  Judge: Anil C. Singh, the court disagrees and finds the pleadings to be necessary and proper.  Defendants get to dismiss a GBL cause of action, but not the main claims.

Plaintiff commenced divorce proceedings against Michael Armstrong in June of 2009. On or about November 17, 2009, plaintiff retained the services of the defendants to represent her in these proceedings. Defendants undertook review of an extensive file generated by plaintiff's prior Counsel, and consented to a scheduling order obliging the parties to exchange documents by December 31, 2009, and sworn net worth statements by January 9, 2010. On April 7, 2010, defendants hired Martin I. Blaustein, C.P .A. to advise on marital spending and lifestyle, the value of Mr. Armstrong's professional licenses and components of the latter's income. Defendants, allegedly based on the strategic advice of their expert, Mr. Blaustein, advised plaintiff to waive valuation, for distributive purposes, of Mr. Armstrong's professional securities licenses. In waiving this valuation on counsel's advice, the plaintiff complains that she improvidently deprived herself of her marital share of an asset valued by her own expert, Mr. Blaustein, at $16,167,000.00.
The gravamen of plaintiffs conflict-of-interest allegations is the professional relationship between defendant Blank Rome and her ex-husband's employer, Morgan Stanley, for which Blank Rome was engaged in lucrative transactional representation in Pennsylvania. Plaintiff contends that the desire to maintain and augment Blank Rome's billings to Morgan Stanley, motivated the individual partners, defendants Norman Heller and Dylan Mitchell, as well as Blank Rome as an entity, to "throw her under the bus."

Plaintiff maintains that the position of her ex-husband, Mr. Armstrong, is so exalted at Goldman Sachs, and that his interests and his company's were so intertwined, as to lend credibility to her allegations. In any event, it is undisputed that no disclosure of this concμrrent professional engagement with Morgan Stanley was ever made to plaintiff, nor was any waiver thereof obtained from her. "In general, we may conclude that 'unnecessarily' pleaded means 'irrelevant.' We should test this by the rules of evidence and draw the rule accordingly .... (I)f the item would be admissible at trial under the evidentiary rules of relevancy, its inclusion in the pleading, whether or not it constitutes ideal pleading, would not justify a motion to strike under CPLR 3024."
(David D. Siegel, Practice Commentaries, McKinney's Cons Laws of N Y, Book 7B, CPLR C:3024:4 at 323 as cited in Soumayah v. Minelli, 41 AD3d 390, 393 [1st Dept 2007], app. withdrawn 9. NY3d 989) "'Where evidence of the facts pleaded in the allegations has any bearing on the subject matter of the litigation and is a proper subject of proof, the presence of such matter involves no prejudice and the allegations are not irrelevant to the cause of action pleaded' [citation omitted.]" Tomasello v Trump, 30 Misc 2d 643, 649 [Sup Ct, Queens County, 1961].) Measured by these standards, defendants have failed to show that the paragraphs complained of lack evidentiary relevance, apparent necessity, or have demonstrated any prejudice resulting from their inclusion. Accordingly, this branch of the motion to strike them is denied."
 

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Mistakes in the Representation, Mistakes in His Own Defense, Huge Legal Malpractice Verdict

Borges v Placeres  2014 NY Slip Op 24053  Decided on March 5, 2014  Appellate Term, First Department  is rather an amazing story.  On one level it is the vindication of a man harmed, on another level it is the story of mistake piled on top of mistake, and in the end, our guess is that there will be a very minimal recovery.   Damages are $1,249,121.37 and it seems to be for mental and emotional disturbance as well as for non-economic damages.  Neither of these types of damages are permissible in Legal Malpractice cases under Dombrowski v. Bulson, 19 NY3d 347 (2012)
 

We wonder whether there was any insurance. based upon the identity of the defense attorney.

Mistakes in the representation:  This legal malpractice action arises out of defendant-attorney's representation of plaintiff, a Venezuelan native, in connection with an immigration matter. The trial evidence showed, and it is not seriously disputed, that despite a specific directive by the United States Immigration Court that plaintiff personally appear in court on a specified date, defendant advised plaintiff not to comply; that plaintiff heeded defendant's advice, with neither one appearing as directed on the court date; and that the intentional nonappearance, representing defendant's purported "strategy" to "buy time," resulted in the Immigration Court's issuance of an in abstentia deportation order against plaintiff and his subsequent 14-month detention in "lockdown" custody. The jury unanimously returned a plaintiff's verdict finding that defendant committed legal malpractice, a determination not now directly challenged by defendant on sufficiency or weight of the evidence grounds.

Mistakes in the defense of the legal malpractice case:With respect to damages, it need be emphasized that our review of the jury's award may not be based on the recent decisional law relied upon by defendant - precedent holding that an award of nonpecuniary damages is generally unavailable to a plaintiff in an action for attorney malpractice (see Dombrowski v Bulson, 19 NY3d 347 [2012]). Notably, defendant did not raise an objection to the jury charge as given, instructing the jury that they could award plaintiff damages for pain and suffering, or to the corresponding question on the verdict sheet, and, indeed, defendant raised no objection at trial to the introduction of evidence regarding the mental and emotional disturbance caused by plaintiff's detention. Thus, the court's unexcepted to jury charge became the law of the case, or more accurately, "consent . . . to the law to be applied" (Martin v City of Cohoes, 37 NY2d 162, 165 [1975]; see Knobloch v Royal Globe Ins. Co., 38 NY2d 471, 477 [1976]). Moreover, defendant does not otherwise argue that the award of damages deviated materially from what would be reasonable compensation (see Harvey v Mazal American Partners, 79 NY2d 218, 225 [1992]).

Turning to the propriety of the denial of defendant's eve-of-trial motion to amend his answer, we find no abuse of the court's discretion. Defendant's motion for leave to include the Statute of Limitations as a defense was made approximately eight years after he served his initial answer, and after plaintiff engaged in discovery, motion practice and placed the case on the trial calendar, presumably spending considerable time and expense preparing for trial. Such prejudice, coupled with defendant's failure to offer an excuse for the substantial delay, warranted a denial of the motion (see Cameron v 1199 Housing Corp., 208 AD2d 454 [1994]; see also Cseh v. New York City Tr. Auth., 240 AD2d 270 [1997]). Defendant's belated motion for summary judgment on the Statute of Limitations defense was also properly denied.

 

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It's Not Malpractice, But, It's The Worst Case This Year

We read all the NY cases published that discuss legal malpractice, and once in a while we read a case that merely mentions the words "legal malpractice" in another setting. Varano v FORBA Holdings, LLC  2014 NY Slip Op 24056  Decided on March 4, 2014  Supreme Court, Onondaga County  Karalunas, J. is the most gruesome case we have read.  
 

"The Old Forba plaintiffs' treatment can be summarized as follows:

Plaintiff Bohn treated at the Syracuse Small Smiles clinic between May 2006 and March 2008, when he was between the ages of three and five. During that time he had four root canals with crowns, seven fillings, two extractions and one crown without a corresponding root canal. He was restrained twice, and on three occasions his teeth were filled without anesthesia. Compl. ¶155.

Defendant Montanye treated at the Syracuse Small Smiles clinic between June 2006 and September 2007, when he was between the ages of two and three. During that time he had four root canals with crowns and six fillings. He was restrained three times, and on three occasions his teeth were filled without anesthesia. Compl. ¶ 163.

Plaintiff Fortino treated at the Syracuse Small Smiles clinic between August 2005 and February 2007, when she was between the ages of four and six. During that time, she had nine root canals with crowns, two fillings, two crowns without corresponding root canals and one extraction. She was restrained four times. Compl. ¶157.

Plaintiff Kenyon treated at the Syracuse Small Smiles clinic between April 2005 and September 2008, when he was between the ages of three and seven. During that time, he had six root canals with crowns and seven fillings. He was restrained three times, and on three occasions his teeth were filled without anesthesia. Compl. ¶158.

Plaintiff Mathews treated at the Syracuse Small Smiles clinic between June 2005 and May 2006, when he was between the ages

of three and four. During that time, he had five teeth filled, two extractions, and one root canal with a crown. He was restrained five times, and on two occasions his teeth were filled without anesthesia. Compl. ¶160.

The defendants common to these five plaintiffs include all the New and Old Forba defendants, Naveed Aman, DDS and Koury Bonds, DDS. In addition, Yaqoob Khan, DDS is a defendant in the Montanye, Fortino, Mathews and Bohn actions, Tarek Elsafty, DDS and Dimitri Filostrat, DDS are defendants in the Montanye and Fortino actions, Janice Randazzo, DDS is a defendant in the Kenyon action, LocVinh Vuu, DDS is a defendant in the Fortino action, and Grace Yaghmai, DDS is a defendant in the Montanye action.

Treatment of the Groups 1-4 plaintiffs who are not also Old Forba plaintiffs can be summarized as follows:Plaintiff Martin treated at the Syracuse Small Smiles clinic between August 2007 and May 2008, when he was two years old. During that time, he had 10 fillings, and on four occasions his teeth were filled without anesthesia. Compl. ¶159.

Plaintiff McMahon treated at the Syracuse Small Smiles Clinic between October 2006 and November 2007, when he was between the ages of one and three. During that time he had four root canals with crowns and four fillings. He was restrained twice. Compl. ¶162.

The case is now consolidated for trial in Syracuse, in the near future.

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The Rare Insurance Company v. Law Firm Legal Malpractice Case

95% of the cases we see are former plaintiff versus their attorney, and the balance are former defendant against their attorney.  Of those, only one or two are the insurance company versus their attorney after a settlement.  Here, in The Insurance Corp. of N.Y. v Smith, Mazure,
Director, Wilkens, Young & Yagerman, P.C. 
 
2014 NY Slip Op 30494(U)   March 3, 2014
Supreme Court, New York County   Docket Number: 102485/2008  Judge: Saliann Scarpulla plaintiff has avoided summary judgment, and the law firm comes back for a second shot.

"Briefly, in this legal malpractice action, plaintiff The Insurance Corporation of  New York (Inscorp) alleges that a Smith Mazure member, Joel Simon, Esq., provided  negligent legal advice to Inscorp in late 2004 and early 2005 regarding the coverage  available under a general liability policy issued by Inscorp to G.B. Construction LLC (the  policy). Inscorp alleges that Simon negligently advised Inscorp's third-party claims administrator, Ward North America (Ward), that Inscorp was contractually obligated to provide a defense and indemnification to both G.B. Construction and West Perry, LLC in an underlying Labor Law action, captioned Soto v. West Perry, LLC, et al. (Sup Ct, NY County, index No. 114283/2001) (the Soto action). Inscorp further alleges that Smith
Mazure improperly advised it to rescind as invalid and untimely two valid late-notice-of claim
disclaimers issued by Inscorp to G.B. Construction, a subcontractor, and to West Penn, the construction site owner. Inscorp alleges that the disclaimers were, in fact, enforceable because West Perry was not an additional insured under the policy, and because neither G.B. Construction nor West Perry had satisfied the policy's notice-of claim requirements."

In the prior order, this court denied Smith Mazure's summary judgment motion, holding that the parties raised triable issues regarding, among other things, whether Smith Mazure improperly simultaneously represented Inscorp and United National Insurance Group (UNG) on the relevant dates in November 2004 through February 2005 with respect to available insurance coverage for West Pen;r and G.B. Construction in the Soto action. In the prior order, the court also found that triable issues existed regarding whether the alleged negligent legal advice was a proximate cause of Inscorp's damages, and held that the damages alleged were sufficiently ascertainable to sustain a legal malpractice claim.

Smith Mazure contends for a second time that Inscorp cannot demonstrate the damages element of a cognizable legal malpractice claim because it cannot distinguish between the money that it expended in defending and indemnifying West Perry from the money that it expended in defending and indemnifying G.B. Construction, inasmuch as the defense and indemnification of both companies were handled simultaneously by a single law firm, Smith Mazure. In the prior order, this court considered this argument, and held that Inscorp's allegations that it incurred "$563, 173.13 in defending and settling the underlying Soto action on behalf of G .B. Construction and West Perry directly as a result of Simon's allegedly negligent coverage advice to Weiss [were] sufficiently actual and ascertainable to sustain a cause of action for legal malpractice."  Last, Smith Mazure argues for the first time that Inscorp cannot prove damages as a result of Smith Mazure's conduct because Inscorp was aware that West Perry was not an additional insured under the policy, prior to its settlement of the Soto action on behalf of West Perry. Inasmuch as Smith Mazure admittedly makes this argument for the first time, the argument cannot form a basis for reargument."

 

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Many Hands Do Not Make a Better Stew

Defense attorneys, when moving to dismiss, or even to denigrate Plaintiff's case will tell the court (rather haughtily) that  "this is the 4th attorney for plaintiff" or something similar.  Their point is that the case must be worthless if there have been multiple attorneys for plaintiff.

Wadsworth Condos LLC v Dollinger Gonski & Grossman.  2014 NY Slip Op 30502(U, ) February 27, 2014 Supreme Court, New York County Docket Number: 600899/2009 Judge: Louis B. York is an example of how a simple thing like obtaining and serving a notice for the expert can get pushed from attorney to attorney, and then cause a problem.

"Plaintiffs Wadsworth Condos, LLC, and 43 Park Owners Group, LLC, move, pursuant to CPLR 2004, 3101 ( d) (1) (i) and 3101 (h), to compel defendants Dollinger, Gonski, & Grossman, and Michael Dollinger (defendants), to accept plaintiffs' supplementary expert witness disclosure, and to allow plaintiffs' experts to testify at trial. Defendants cross-move for an order denying plaintiffs' motion to compel the acceptance of the expert disclosure."

This action involves allegations that defendants committed legal malpractice when they allegedly commenced an action without plaintiffs' authorization. Plaintiffs served a summons and complaint on defendants on March 24, 2009. Plaintiffs' first attorney of record in this action  was Silverman, Sclar, Shin, & Byrne. On October 5, 2009, the law firm of Shapiro & Shapiro,LLP, took over as plaintiffs' counsel, followed by Daniel Friedman, Esq. who served as counsel until March 24, 2011, at which time the law firm of Peter R. Ginsberg Law, LLC, was retained. Plaintiffs' present counsel is Marc M. Coupey, Esq., who became plaintiffs' sole counsel on August 17, 2012.


Plaintiffs contend that, on August 5, 2011, they served on all parties their initial response to defendants' demand for expert witness information in which they reserved their rights to provide defendants with expert information once they retained such experts. Plaintiffs maintain that on November 4, 2011, all parties were notified at the deposition of witness Joe Bobker that Michael Sullivan was going to be plaintiffs expert and what his probable testimony would be. "

"The Appellate Division, First Department, has held that "[p ]preclusion of expert evidence on the ground of failure to give timely disclosure, as called for in CPR 3101 ( d) (1) (i), is generally unwarranted without a showing that the noncompliance was willful or prejudicial to the party seeking preclusion." Martin v Tribune Bridge & Tunnel Auth., 73 AD3d 481, 482 (1st Dept 2010) (citations omitted). See also Handwork v City of New York, 90 AD3d 409, 409 (1st Dept 2011) (holding that there is no evidence of what prejudice defendants suffered or that plaintiff willfully failed to disclose the experts in a timely manner). Here, defendants fail to meet their burden and do not demonstrate what, if any, prejudice they will suffer if plaintiffs serve expert disclosure. "

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The Case is Settled...Now Comes the Bigger Fight

Piro sued Russo, Karl, Widmaier & Cordano PLLC for legal malpractice.  Piro used attorney Rodriguez for that case.  At the same time Bonacasa obtained a default judgment against Piro. A guess is that both arose from the same issues and that Russo, Karl should have been defending Piro from Bonacasa.  So, in Russo, Karl, Widmaier & Cordano PLLC v Piro  2014 NY Slip Op 30505(U)  February 24, 2014  Supreme Court, Suffolk County  Docket Number: 13-19943  Judge: Peter H. Mayer, we see both Rodriguez and Bonacasa fighting over the same proceeds.  The winner is determined by Judiciary Law 475.  Proceeds of a litigation have a higher priority than other debts. 

"Rodriguez now cross-moves for an order directing the plaintiffs to release its legal fee of $30,000, and dismissing Bonacasa's cross claims. In support of its cross motion, Rodriguez submits, among other things, the pleadings herein, its written retainer agreement and billing statements in the Piro action, a copy of a Court order in the Bonacasa action, and a "settlement" signed by Piro regarding Rodriguez's legal fee. It is undisputed that Rodriguez was retained by Piro on January 10, 2010, that Rodriguez commenced the Piro action on February 1, 2010, that Rodriguez  represented Piro throughout the litigation, and that Rodriguez claims a charging lien based on its procuring a settlement in the mount of $65,000. It is 'A-ell settled that a charging lien for legal fees attaches automatically upon commencement of the client's action (Judiciary Law 475; Resnick v Resnick, 24 AD3d 238, 806 NYS2d 200 [1st Dept 2005]; Matter of Dresner v State of New York, 242 AD2d 627, 662 NYS2d 780 [2d Dept 1997]; Rotker v Rotker, 195 Misc 2d 768, 761 NYS2d 787 [Sup Ct, Westchester County 2003]; see also Matter of Cohen v Grainger, Tesoriero & Bell, 81NY2d655, 602 NYS2d 788 [1993]). An attorney's charging lien is vested equitable ownership interest in client's cause of action and maintains superiority over anyone claiming through the client (LMWT Realty Corp. v Davis Agency Inc., 85 NY2d 462, 626 NYS2d 39 [1995]; see also Banque Indosuez v Sopwith Holdings Corp., 98 NY2d 34, 745 NYS2d 754 [2002]; O'Connor v Spencer (1977) Inv. Ltd. Partnership, 8 Misc 3d 658, 798 NYS2d 888 [Sup Ct, Queens County 2005]). The right to assert such a lien is based upon the equitable doctrine that an attorney should be paid out of the proceeds of the judgment procured by the attorney (Theroux v Theroux, 145 AD2d 625, 536 NYS2d 151 [2d Dept 1988]; see LMWT Realty Corp. v Davis Agency, supra; Kaplan v Reuss, 113 AD2d 184, 495 NYS2d 404 [2d Dept 1985], affd 68 NY2d 693, 506 NYS2d 304 [ 1986]). The statute codifying the law regarding charging liens, Judiciary Law 475, provides, in relevant part, "[f]rom the commencement of an action ... the attorney who appears for a party has a lien upon his client's cause of action, claim or counterclaim, which attaches to a ... determination, decision, judgment
or final order in his client's favor, and the proceeds thereof in whatever hands they may come."  thus, a charging lien affects only the proceeds obtained in a particular litigation and may be enforced only to obtain the reasonable value of legal services and disbursements in connection with that litigation (Kaplan v Reuss, id.; see Natole v Natole, 295 AD2d 706, 708, 744 NYS2d 227 [3d Dept 2002]; Butler, Fitzgerald & Potter v Ge/min, 235 AD2d 218, 651NYS2d525 [1st Dept 1997]; Surdam v Marine Midland Bank, 198 AD2d 578, 603 NYS2d 233 [3d Dept 1993]). It has been held that the statute is remedial in nature and calls for a liberal construction thereunder (Herlihy v Phoenix Assur. Co., 274 AD 342, 83 NYS2d 707 [3 Dept 1948]). Here, Rodriguez has established its entitlement to summary judgment regarding its claim to a  charging lien and the release of its legal fees in the Piro action. 2 Thus, it is incumbent upon the nonmoving parties to produce evidence in admissible form sufficient to require a trial of the material issues of fact (Roth v Barreto, supra; Rebecchi v Whitmore, supra; O'Neill v Fishkill, supra). In opposition to Rodriguez's cross motion, Bonacasa submits the affirmation of her attorney, who reiterates the contentions set forth in her cross motion for summary judgment. As determined above, Bonacasa has failed to raise an issue of fact requiring a trial of Rodriguez's claim for legal fees. As noted above, Piro does not dispute the validity of his retainer agreement with Rodriguez, or the legal fee charged thereunder."
 

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$ 30 Million at Stake and Too Late For Legal Malpractice

AQ Asset Mgt. LLC v Levine  2014 NY Slip Op 30489(U) February 27, 2014  Sup Ct, New York County  Docket Number: 652367/2010  Judge: Shirley Werner Kornreich is the story of a big deal gone bad, and how that failure devolves into looking for suspects.  Put another way, the clients are now looking to see how and why they might get more money back.  In a case that has spanned 37 motions and more than 1200 documents the parties aren't even through depositions.  One thing is clear...it's too late to sue for legal malpractice.  The only question left is fraud and accounting for $30 Million.

"Pursuant to an order dated March 22, 2013, Levine deposited $3,420,787.01 into court, which he claimed represented the remaining balance of the escrow funds at issue in this action. By order dated April 9, 2013, he was directed to account for his handling of the escrow from the time of receipt until the time of deposit. Levine produced an affidavit of account, which he claims sets forth all of the transactions related to the escrow, with supporting exhibits attached. According to Levine's affidavit, the principal, original escrow amount remaining was $3,405,979.68; the amount
deposited with the court included accrued interest to which Levine claims he is entitled. By order dated October 16, 2013, pursuant to a decision by the Appellate Division, the court directed that the monies deposited by Levine be released to defendants' attorney (NYSCEF Doc No. 1053).
On April 22, 2013, plaintiffs served a reply to defendants' original counterclaims. On May 6, defendants served an amended answer, containing counterclaims against plaintiffs  and cross-claims against Michael Levine. Though the amended answer contained a demand that Levine answer (see amended cross-claims~ 305; CPLR 3011 ), Levine has refused to do so. "

"A. Default Judgment
As indicated at oral argument, the issue of Levine's responsive pleading shall be resolved by requiring him to serve an answer to defendants' cross-claims within twenty days. That branch of the motion seeking to hold him in default for failing to answer, therefore, is denied.

B. Cross-Motion to Dismiss
In their amended answer defendants allege that, acting in concert with Zimmermann and Artist House, Levine misled Patrizzi as to the contents of the Distribution Agreement, thereby inducing him to sign it. That agreement was later used to confer voting rights on Zimmermann, who in tum used his power to join with Artist House in removing Patrizzi from management and, later, in reducing defendants' shares in the Company to zero. Defendants also have called into question the final $300,000 payment Levine claims to have made from the escrow to procure a financing commitment from an entity known as Karastir LLC (Karastir), contending that they never authorized that disbursement. These allegations are sufficient to sustain defendants' third and fourth cross-claims against Levine for fraud and breach of his fiduciary duties as escrow agent. Similarly, defendants' first cross-claim for a declaratory judgment that they are entitled to all funds or shares that were delivered to or held by Levine as part of the stock transaction is viable, as is their demand for an accounting.
The other cross-claims challenged here lack merit. The second cross-claim seeks a declaration that defendants have satisfied all of their obligations under the stock purchase agreement and bear no further liability arising out of the stock transaction. Defendants do not explain how any controversy regarding their obligations thereunder could implicate Levine, who was not a party to the transaction. The second cross-claim is dismissed. Since the court has previously held that defendants cannot maintain any claim based on their supposed entitlement to a certain payment of $2 million that was made to Levine's escrow account in 2006 and released by him to  Antiquorum in 2010 (decision & order, Mar 28, 2013, 18-19), the eighth, eleventh and twelfth cross-claims (for constructive fraud, conversion and fraudulent concealment) are dismissed in their entirety, and the third cross-claim for fraud is also dismissed to the extent it relates to the transfer of these funds. Defendants are attempting to use their right to replead to improperly circumvent a decision on the merits which has not been reversed or modified and for which they did not seek reargument (DiPasquale v Sec. Mut. Life Ins. Co. of New York, 293 AD2d 394, 395 [1st Dept 2002] citing Societe Nationale d'Exploitation Jndustrielle des Tabacs et Allumettes v Salomon Bros. Intl., Ltd., 268 AD2d 373, 374 [1st Dept 2000] Iv denied 95 NY2d 762 [2000]; Romanov Kassebaum, 250 AD2d 661, 662 [2d Dept 1998]; see also The Plaza PH2001 LLC v Plaza Residential Owner LP, 98 AD3d 89, 98 [lst Dept 2012] [upholding dismissal of second action commenced prior to  modification of motion court's dismissal of first action on merits])."

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A Missing Ladder, A Legal Malpractice Case

Sometimes legal malpractice cases are an exercise in looking back.  Plaintiffs look backwards to what happened at the first trial, or what went wrong years ago.  Burbige v Siben & Ferber
2014 NY Slip Op 01426  Decided on March 5, 2014  Appellate Division, Second Department  is an example.  Plaintiff fell from a broken ladder at work.  Not stated, but presumed is that he had a workers' compensation case. Two years later he hired the defendant attorneys to sue the manufacturer.  They did, and the manufacturer promptly filed for bankruptcy.  Left unexplained is who has the ladder?
Now, plaintiff sues the attorneys for lack of diligence in suing the manufacturer.  While the case discusses timing of expert witness notifications, it does hold that the attorneys cannot be sanctioned for not having the ladder.  They have a picture, but it's a mystery who has the ladder.

"In August 1989, the plaintiff was injured when a metal railing on a ladder he was descending broke off, causing him to fall. In June 1991, he retained the defendant Siben & Ferber, a partnership consisting of Gary L. Siben and Steven B. Ferber (hereinafter S & F), to represent him in a products liability lawsuit against the ladder manufacturer. The action was commenced in August 1991. After issue was joined in October 1991, the manufacturer filed for bankruptcy. The products liability action remained dormant until March 2004, when the defendant Leonard G. Kapsalis, then an associate at S & F, contacted the plaintiff to sign authorizations to verify his responses to interrogatories. One of the responses indicated that the plaintiff's employer had retained the subject ladder after his accident. However, while S & F's legal file contained photographs of the ladder, the location of the ladder was unknown. In 2007, the plaintiff commenced this legal malpractice action alleging, inter alia, that the defendants were negligent in failing to diligently prosecute the products liability action. The plaintiff now appeals from an order of the Supreme Court which granted the defendants' motion to preclude his expert from testifying at a retrial and which denied his cross motion pursuant to CPLR 3126 to impose a sanction upon the defendants for the spoliation of evidence.

CPLR 3101(d)(1)(i) "does not require a party to respond to a demand for expert witness information at any specific time nor does it mandate that a party be precluded from proffering expert testimony merely because of noncompliance with the statute,' unless there is evidence of intentional or willful failure to disclose and a showing of prejudice by the opposing [*2]party" (Cutsogeorge v Hertz Corp., 264 AD2d 752, 753-754, quoting Lillis v D'Souza, 174 AD2d 976, 976 [internal quotation marks omitted]; see Barchella Contr. Co., Inc. v Cassone, 88 AD3d 832, 832; Saldivar v I.J. White Corp., 46 AD3d 660; Fava v City of New York, 5 AD3d 724, 724-725). Here, the record does not support a conclusion that the plaintiff's delay in retaining his expert or in serving his expert information was intentional or willful. Furthermore, any potential prejudice to the defendants was ameliorated by a two-month adjournment of the retrial agreed to by the parties (see Shopsin v Siben & Siben, 289 AD2d 220, 221). Accordingly, the Supreme Court improvidently exercised its discretion in granting the defendants' motion to preclude the plaintiff's expert from testifying at the retrial (see Johnson v Greenberg, 35 AD3d 380; Dailey v Keith, 306 AD2d 815, affd 1 NY3d 586).

Contrary to the plaintiff's contention, the Supreme Court properly denied his cross motion pursuant to CPLR 3126 to impose a sanction upon the defendants for the spoliation of evidence, as there is no evidence that the defendants were responsible for the loss or destruction of the subject ladder (see Gotto v Eusebe-Carter, 69 AD3d 566, 567). "

 

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Is It Enough For A Good Legal Malpractice Case?

The Client comes in and tells you, "They didn't know the case!  They didn't prepare!  They lost the case!"  Is that enough for a good legal malpractice case?  A demonstrated lack of skill and a failure to prepare for litigation might seem proper fodder for a legal malpractice case, it's not always enough.

In Chibcha Rest., Inc. v David A. Kaminsky & Assoc., P.C. 2013 NY Slip Op 00281 Appellate Division, First Department the court held: "Plaintiffs' allegations that defendants made "no useful attempt" to argue against a TRO sought and obtained by the landlord, and that defendants were both unprepared and unskilled in defending them, do not suffice. As the motion court observed, plaintiffs do not allege, for example, that defendants missed any deadlines or otherwise failed to protect or preserve plaintiffs' rights (see Mortenson v Shea, 62 AD3d 414, 414-415 [1st Dept 2009])."

This case demonstrates the bold difference between a failure to file within a deadline, and almost all other shortcomings. Presentation of a certain witness, selection of an expert, questions put in cross-exam. All very important, but none of them a failure to file within a deadline or a failure to preserve a client's rights.

The Court explains further: "Contrary to plaintiffs' assertions, the record supports the motion court's conclusion that plaintiffs' damages, sustained from the closing of the subject premises after issuance of the TRO, were not caused by defendants' conduct, but rather by plaintiffs' failure to obtain the necessary insurance before the landlord brought its motion for a temporary restraining order. Plaintiffs concede that the insurance coverage required by the lease initially was not in place, and that the TRO against them was lifted only after the requisite insurance was obtained. As the premises were closed due to the lack of insurance, it cannot be said that plaintiffs would not have incurred any damages, but for defendants' purported negligence (Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442 [2007])."
 

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Here, It's Not Simply the Departure, It's The "But For" Connection

Plaintiff must always prove that departures from good and accepted practice by the defendant were a proximate cause of the injury. Note that there need be no proof that the departure was the proximate cause. In Arbor Realty Funding, LLC v Herrick, Feinstein LLP 2013 NY Slip Op 01216
Appellate Division, First Department we see such an application.
"Defendant argues that even if, but for its allegedly erroneous legal advice as to zoning issues, plaintiff would not have made bridge loans to the developer of a residential tower at 303 East 51st Street in Manhattan, plaintiff cannot establish legal malpractice or negligent representation because it cannot demonstrate that the zoning advice proximately caused its loss on the defaulted loans. Plaintiff made the loans in mid-2007. Defendant contends that the crane collapse at the project site in March 2008, which killed seven people, the market collapse beginning in late 2007 and continuing through 2008, and plaintiff's insufficient response to the Department of Buildings letter notifying plaintiff of its intent to revoke the project's building permits, constituted intervening events that severed the causal link between defendant's zoning advice and plaintiff's loss (see Derdiarian v Felix Contr. Corp., 51 NY2d 308 [1980]).

There is, however, evidence in the record that raises an issue of fact as to causation (see Brooks v Lewin, 21 AD3d 731, 734 [1st Dept 2005], lv denied 6 NY3d 713 [2006]). It appears [*2]that potential takeout lenders had concerns about the zoning issues even before March 2008. To the extent later events contributed to plaintiff's loss, they are properly considered by a fact-finder (see e.g. Schauer v Joyce, 54 NY2d 1 [1981])."
 

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Claims Fail, One by One in this Pro-Se v. Pro-Se Lawsuit

Plaintiff was charged with violating the Cornell University Campus Code by allegedly harassing a professor.  From there on in her legal arc was consistently downward.  She hired defendant attorneys to represent her in a CPLR Art. 78 and in a Title IX claim.  Both were unsuccessful.  She then sued all the attorneys, both individually and as a firm. 

In Hyman v Schwartz   2014 NY Slip Op 01362   Decided on February 27, 2014   Appellate Division, Third Department  the AD dismissed legal malpractice claims against all.

"However, defendants correctly argue that Supreme Court should have granted their motion to dismiss the legal malpractice claim. It is well established that, "[i]n order to sustain a claim for legal malpractice, a plaintiff must establish both that the defendant attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession which results in actual damages to a plaintiff, and that the plaintiff would have succeeded on the merits of the underlying action but for the attorney's negligence" (Leder v Spiegel, 9 NY3d 836, 837 [2007], cert denied sub nom. Spiegel v Rowland, 552 US 1257 [2008] [internal quotation marks and citation omitted]; accord Alaimo v McGeorge, 69 AD3d 1032, [*3]1034 [2010]; see Kreamer v Town of Oxford, 96 AD3d 1128, 1128-1129 [2012]; see also MacDonald v Guttman, 72 AD3d 1452, 1454-1455 [2010]; Bixby v Somerville, 62 AD3d 1137, 1139 [2009]). Here, although the complaint is replete with allegations of Schwartz's alleged failures to use reasonable and ordinary skill in connection with both of plaintiff's underlying claims, it contains no allegation that, but for these alleged failures, plaintiff would have been successful on either claim [FN2]. Therefore, even if we accept the allegations as true and liberally construe the complaint to allege negligent representation by Schwartz (see Leon v Martinez, 84 NY2d 83, 87-88 [1994]; Moulton v State of New York, ___ AD3d ___, ___, 977 NYS2d 797, 801 [2013]; Scheffield v Vestal Parkway Plaza, LLC, 102 AD3d 992, 993 [2013]), the allegations are insufficient to make out a prima facie case of legal malpractice (see Kreamer v Town of Oxford, 96 AD3d at 1128; MacDonald v Guttman, 72 AD3d at 1455). "


 

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It's Sue and Be Sued in a Mega-Huge Legal Malpractice Case

In today's New York Law Journal Christine Simmons reports on how the big boys play at legal malpractice.  Basically, it's client with at least $1B in play hires Proskauer to advise them on a new borrowing/lending plan, which goes awry.  Lots of taxes become due, and finger pointing ensues.  The news in this dog bites man story is that Proskauer has counterclaimed against the client for fraud, constructive fraud and misrepresentation.

Here is something from the story: " After its former client sued the firm for malpractice, Proskauer Rose and four of its partners have sued the client's senior executives, claiming the malpractice suit has harmed the firm's reputation and led it to incur substantial legal fees (See Complaint).

Proskauer is suing James Edelson, the general counsel to Overseas Shipholding Group (OSG); and Myles Itkin, the company's former chief financial officer in Manhattan Supreme Court.

The firm and the partners—Alan Parnes, Richard Rowe, Peter Samuels and Steven Weise—claim the executives solicited legal advice from Proskauer based on "materially false and misleading representations."

Ultimately, OSG filed for Chapter 11 relief in 2012 and a year later sued Proskauer for malpractice, claiming the company expected to have to pay hundreds of millions of dollars in U.S. taxes due to Proskauer's advice (See Complaint).

Proskauer and the four partners are claiming fraud, constructive fraud, negligent misrepresentation and contribution against the executives. They say they have "suffered tremendous reputational damage as a result of OSG's meritless [claims]."


In May 2011, OSG entered into a new credit agreement, but within a few months began preparing refinancing negotiations, Proskauer said. These discussions drew attention to the "joint and several" language in the 2006 credit agreement and the bank lending group expressed concerns about OSG's potential tax liability, Proskauer said.

"Spurred by its need for liquidity, and with knowledge that its own false representations were a fundamental basis of the Memorandum, OSG drew down the funds that remained in its 2006 credit facility—approximately $340 million," Proskauer said in its complaint.

Negotiations with the bank lending group broke down, and OSG became focused on a bankruptcy filing. Proskauer was hired as its restructuring counsel.

Around this time, when Proskauer was asked to turn the memo into an opinion, the firm said it learned of a "trove of hidden documents."

In late October 2012, Samuels, while at OSG's offices, saw for the first time "numerous documents that wholly undermined Edelson's and Itkin's repeated assertions" to Proskauer that the parties to the credit agreements never intended that OIN guarantee OSG's obligations, the firm said in its complaint.

For example, OSG had a document that "plainly indicates that both OSG and its counsel Clifford Chance understood and intended that OIN be a guarantor of OSG's debts under that agreement via the 'joint and several' structure."

"Had Proskauer been aware of these documents prior to drafting the Memorandum, it would have materially altered its conclusion," the firm said. In the end, the firm refused to provide a formal tax opinion.

Also in October 2012, OSG informed the firm that Proskauer would be replaced with new restructuring counsel, and OSG revoked the firm's access to its offices.

The following month, OSG and 180 of its affiliates, including OIN and OBS, filed for Chapter 11 relief in Delaware bankruptcy court."  Read on for more at: http://www.newyorklawjournal.com/id=1202644791712/Proskauer-Sues-Ex-Client-Accusing-Firm-of-Malpractice#ixzz2ucUkb9Qs

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A Pro-Se Legal Malpractice Win in Supreme Court and in the Appellate Division

Reading decisions of the Appellate Division in legal malpractice cases involving attorneys on both sides often shows the AD dismissing the complaint on "but for" grounds.  The AD will look closely at the underlying transactions which led to the underlying litigation, and will decide whether there would have been a better or different outcome.

In contrast, and especially in this pro-se v. defendant attorney case, the AD took a more gentle approach and affirmed the denial of summary judgment to the attorney.  Rodolico v Rubin & Licatesi, P.C. 2014 NY Slip Op 01308  Decided on February 26, 2014  Appellate Division, Second Department discussed pre-discovery summary judgment motions.
 

"The plaintiff's sister worked for the defendant law firm, in which the individual defendants are partners. During his sister's employment, the plaintiff came to learn of an investment opportunity being organized by the defendants, which involved providing high interest, short-term loans for the development of real estate. The plaintiff and his wife decided to participate. Two bank checks, one of which was purchased by the plaintiff's wife and bore only her name, were forwarded to the defendants for the purpose of making two loans. When these two loans were not repaid in full, the plaintiff commenced this action seeking to recover from the defendants the money that he was owed, claiming that the defendants effectively borrowed the money from him (first and second causes of action). In the alternative, the plaintiff sought damages for legal malpractice (third cause of action). The plaintiff made a pre-discovery motion for summary judgment on the complaint, and the defendants cross-moved, inter alia, to dismiss the second cause of action pursuant to CPLR 3211(a)(3), for lack of standing, and to dismiss the complaint pursuant to CPLR 3211(a)(1), based upon documentary evidence. The Supreme Court denied the motion and the cross motion.

In support of that branch of their cross motion which was to dismiss the second cause of action for lack of standing, the defendants argued that the plaintiff had no interest in the loaned funds because the funds were provided by his wife. However, the plaintiff established, through his affidavit, that the funds provided for the subject loan belonged to both him and his wife (see Rodolico v Rubin & Licatesi, P.C., 112 AD3d 608, 609-610). The defendants presented no evidence to the contrary. The plaintiff, therefore, had standing to seek the return of the funds (see id.; see generally Wells Fargo Bank Minn., N.A. v Mastropaolo, 42 AD3d 239, 242), and the Supreme Court properly denied that branch of the defendants' cross motion which was to dismiss the second cause of action for lack of standing. [*2]

The Supreme Court also properly denied that branch of the defendants' cross motion which was to dismiss the complaint pursuant to CPLR 3211(a)(1). A motion pursuant to CPLR 3211(a)(1) to dismiss a complaint on the ground that a defense is founded on documentary evidence "may be appropriately granted only where the documentary evidence utterly refutes [the] plaintiff's factual allegations, conclusively establishing a defense as a matter of law" (Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d 314, 326; see Parkoff v Stavsky, 109 AD3d 646; Benson v Deutsche Bank Natl. Trust, Inc., 109 AD3d 495). Further, the evidence submitted in support of a motion pursuant to CPLR 3211(a)(1) to dismiss a complaint on the ground that a defense is founded on documentary evidence "must be documentary' or the motion must be denied" (Cives Corp. v George A. Fuller Co., Inc., 97 AD3d 713, 714, quoting Fontanetta v John Doe 1, 73 AD3d 78, 84 [internal quotation marks omitted]; see Rodolico v Rubin & Licatesi, P.C., 112 AD3d at 610). " [N]either affidavits, deposition testimony, nor letters are considered documentary evidence within the intendment of CPLR 3211(a)(1)'" (Cives Corp. v George A. Fuller Co., Inc., 97 AD3d at 714, quoting Granada Condominium III Assn. v Palomino, 78 AD3d 996, 997; see Rodolico v Rubin & Licatesi, P.C., 112 AD3d at 610; Suchmacher v Manana Grocery, 73 AD3d 1017; Fontanetta v John Doe 1, 73 AD3d at 86).

Here, with respect to the first and second causes of action, the defendants submitted two checks that the plaintiff and his wife provided for the investments, which were written to the defendants' IOLA account. Those checks do not "utterly refute" the plaintiff's allegations that the defendants borrowed funds from the plaintiff and his wife or "conclusively establish[ ] a defense as a matter of law" (Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d at 326).

The only other evidence submitted by the defendants pertaining to these causes of action as well as the legal malpractice cause of action was affidavits, which do not constitute " documentary evidence within the intendment of CPLR 3211(a)(1)'" (Cives Corp. v George A. Fuller Co., Inc., 97 AD3d at 714, quoting Granada Condominium III Assn. v Palomino, 78 AD3d at 997; see Rodolico v Rubin & Licatesi, P.C., 112 AD3d at 610).

Accordingly, that branch of the defendants' cross motion which was to dismiss the complaint pursuant to CPLR 3211(a)(1) was properly denied (see Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d at 326; Rodolico v Rubin & Licatesi, P.C., 112 AD3d at 610; Cives Corp. v George A. Fuller Co., Inc., 97 AD3d at 714; Integrated Constr. Servs., Inc. v Scottsdale Ins. Co., 82 AD3d 1160, 1163; Fontanetta v John Doe I, 73 AD3d at 86). "

 

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They Never Met, Yet The Attorneys Represented Them Anyways

Schlam Stone & Dolan, LLP v Poch  2014 NY Slip Op 30415(U)  February 17, 2014  Supreme Court, New York County  Docket Number: 105769/11  Judge Shlomo S. Hagler presents the question of whether an attorney may be hired to represent an entity, and then represent the individual officers or members, without their knowledge.  What happens when things do not go so well?

In a housing court proceedings, Arfa and Shpigel came to be represented by defendants.  Arfa and Shpigel say that they did not know there was a case, did not know that they were represented, nor did they know that things were going badly in landlord-tenant court.  Indeed, things did go badly.

"Plaintiff’s assignors, Arfa and Shpigel, claim that Poch, an  attorney, committed malpractice when he purported to represent  them without authority in five Housing Court proceedings, wherein 
numerous violations were brought against Arfa and Shpigel, among  others, in their role as owners of the properties subject to the  violations and which Poch settled by five Consent Orders dated
June 24, 2008 (“Consent Orders”) .Arfa and Shpigel complain that Poch committed malpractice by failing to inform them that he was  representing them in the Housing Court matters (of which they
claim to have been ignorant), failing to discuss the matters with  them including exploring possible defenses, failing to inform  them that they were personally named and liable for fines arid  repairs, and by entering into the Consent Orders allegedly  without their knowledge or consent.  Arfa and Shpigel state that they only became aware of the existence of the Consent Orders when they were  called into court to answer contempt proceedings.... "

Arfa and Shpigel litigated through the Civil Court and to the Appellate Term.  Both courts determined that the defendant attorneys had apparent authority.  Is that Collateral Estoppel?  No.

Judge Hagler determined that "To establish collateral estoppel, there must have been an “identical issue . . . necessarily decided in the prior action or  proceeding [which] is decisive of the present action” and a  showing chat “the party who is attempting to relitigate the issue  had a full and fair opportunity to contest it in the prior action  or proceeding” (Matter of Howard v Stature Elec. Inc., 20 NY3d  522, 525 [2013]  citing Kaufman v Eli Lilly & Co., 65 NY2d 443,  455 [1985]; see also Matter of Hoffman, 287 AD2d 119 [lst Dept  2111).  In the present motion, defendants assert that the Appellate Term Decisions have completely resolved the issues in this case  and that they should not be relitigated here. To properly apply  the doctrine of collateral estoppel, this Court must determine  whether Judge Klein and the Appellate Term decided the “identical issue” which is “decisive” of this legal. malpractice act ion.  The issue before Judge Klein and the Appellate Term was limited to whether defendants had the authority ‘to represent Arfa and Shpigel in two discrete  housing Court proceedings which were  ]settled by two Consent Orders. The issue in this case, however,  is whether defendants’ committed legal malpractice in  representing Arfa and Shpigel in five Housing Court proceedings.  More specifically, Arfa and Shpigel not only allege that
defendants did not have authority to act on their behalf, but  defendants also failed to advise and explore with them any  possible defenses prior to entering into the Consent Orders in  all five Housing Court proceedings.  As such, the only issue that the Appellate Term conclusively
determined is that defendants had the authority to represent Arfa  and Shpigel in those two Housing Court Proceedings and are bound by the resulting two Consent Orders. The Appellate Term never determined the issue as to whether defendants committed legal  malpractice in the five Housing Court proceedings. Irrespective  of the doctrine of collateral estoppel, this Court must also  address whether defendants have met their burden in demonstrating  entitlement to summary judgment dismissing this legal malpractice  action. "

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A Personal Injury Case and A Legal Malpractice Case Side by Side

Personal injury and legal malpractice cases have many strong bonds. Because a sizable portion of the litigation world is devoted to personal injuries (on both the plaintiff's and defendant's side), one correctly expects significant legal malpractice litigation after-wards. How the legal malpractice case proceeds along with or after the PI case is a not well understood procedure. In Simoni v Costigan 2012 NY Slip Op 07882  Appellate Division, First Department andSimoni v Napoli 2012 NY Slip Op 08639 Decided on December 13, 2012 Appellate Division, First Department we see two sides of the same issue.
 

 

 

Costigan: Although the personal injury actions and the legal malpractice action involve "a common question of law or fact" (CPLR 602[a]), consolidation could engender jury confusion and [*2]prejudice the defendants in the malpractice action (see Addison v New York Presbyt. Hosp./Columbia Univ. Med. Ctr., 52 AD3d 269, [1st Dept 2008]; Brown v Brooklyn Union Gas Co., 137 AD2d 479 [2nd Dept 1988]).

 

Napoli: The motion court providently exercised its discretion in denying defendants' request for a stay of the legal malpractice action pending resolution of plaintiff's personal injury action (see CPLR 2201). The proceedings do not share complete identity of parties, claims and relief sought (see 952 Assoc., LLC v Palmer, 52 AD3d 236 [1st Dept 2008]; Esposit v Anderson Kill Olick & Oshinsky, P.C., 237 AD2d 246 [2d Dept 1997]).

The motion court also properly permitted plaintiff to amend the complaint (see CPLR 3025[b]). The amended complaint and the documents submitted in support of the cross motion allege facts from which it could reasonably be inferred that defendants' negligence caused plaintiff's loss (see Garnett v Fox, Horan & Camerini, LLP, 82 AD3d 435 [1st Dept 2011]). At this stage of the proceedings, plaintiff does not have to show that he actually sustained damages as a result of defendants' alleged malpractice (id. at 436).

 


 

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Really, I had Nothing to Do With This Legal Malpractice!

Real estate broker is asked to find a buyer. Broker presents a buyer, but no deal ensues. Broker papers the transaction and sits back. Later transaction goes through and Broker eventually seeks commission. Sellers attorney is sued. Is he liable?

Land Man Realty, Inc. v Faraone 2012 NY Slip Op 08218 Appellate Division, Third Department tells us the following: it's not enough to say " I did not commit malpractice," so please let me out of the case!
 

"The facts of this case are more fully set forth in our prior decision of this matter (70 AD3d 1246 [2010]), as well as another related decision of this Court (Land Man Realty, Inc. v [*2]Weichert, Inc., 94 AD3d 1221 [2012]). Briefly, defendants owned a 54-acre parcel of land in the Town of Wilton, Saratoga County, and entered into an exclusive listing agreement with Weichert Realtors Northeast Group to sell the property. Shortly thereafter, plaintiff's counsel sent multiple letters to, among others, defendants, claiming that it had previously presented Capital District Property, LLC (hereinafter CDP) as purchaser of the property prior to the property being listed with Weichert. Therefore, in the event that CDP purchased the property, plaintiff would be entitled to a 10% commission pursuant to an alleged oral agreement with defendants. Weichert ultimately sold the property to CDP.

Thereafter, plaintiff commenced this action against defendants, claiming that it was the procuring cause of the sale of the property and is entitled to a 10% commission pursuant to an alleged agreement with defendants. As is relevant herein, defendants, in turn, commenced a third-party action against third-party defendant, Robert W. Pulsifer, an attorney who represented defendants in the real estate transaction. Defendants claim that Pulsifer (1) failed to respond or take any action regarding plaintiff's letters asserting a claim for a commission, and (2) negotiated the contract for the sale of property to CDP in a manner that did not sufficiently protect defendants against plaintiff's commission claim. Defendants moved for summary judgment dismissing the complaint and Pulsifer moved for summary judgment dismissing the amended third-party complaint. Supreme Court denied both motions. Pulsifer now appeals.

We affirm. A legal malpractice action requires a showing that an attorney "failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession [and] the attorney's breach of this professional duty caused the plaintiff's actual damages" (McCoy v Feinmann, 99 NY2d 295, 301-302 [2002] [internal quotation marks and citations omitted]; see Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442 [2007]; M & R Ginsberg, LLC v Segal, Goldman, Mazzotta & Siegel, P.C., 90 AD3d 1208, 1208-1209 [2011]). Here, although Pulsifer himself avers that based upon his legal experience he was not negligent in the advice and representation he provided to defendants, he failed to submit adequate proof establishing the applicable standard of care and whether he breached that standard. As Pulsifer failed to meet his initial legal burden of establishing his entitlement to summary judgment as a matter of law (see Jack Hall Plumbing & Heating, Inc. v Duffy, AD3d , ___, 2012 NY Slip Op 07249, *2 [2012]), his summary judgment motion was properly denied.


 

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They May Have Been Wrong, But They Were Not Frivolous

It was not said by Lord Acton that control of the bank account corrupts, and that absolute control of it  corrupts absolutely, but United States Fire Ins. Co. v Raia  2014 NY Slip Op 00987 Decided on February 13, 2014  Appellate Division, Second Department does show that guardians who control their ward's bank accounts can wreak havoc.
 

The surety insurance company came to be plaintiff after "defendant Camille A. Raia was appointed guardian of the property of Andrea S., an incapacitated person (hereinafter the IP). Raia obtained a guardianship bond through the plaintiff, United States Fire Insurance Company (hereinafter US Fire), as surety. During the course of the guardianship, Raia retained the defendant Cavalcante & Company (hereinafter C & C), an accounting firm, to prepare annual tax returns on behalf of the IP. Ultimately, Raia was removed as the guardian of the IP's property as a result of a criminal investigation. The court accepted an account-stated as [*2]Raia's final account for the period she acted as guardian of the IP's property, and surcharged her in a certain amount. US Fire and the IP, through a successor guardian, entered into a stipulation by which the IP released US Fire from further liability under the bond and assigned all rights and causes of action to it in exchange for a payment in the amount of $1,100,000.

US Fire, on its own behalf and as the IP's subrogee/assignee, commenced this action against Raia, Raia & Rondos, P.C. (hereinafter the R & R firm), Steven T. Rondos, C & C, and another defendant. US Fire alleged, with respect to C & C, that it committed professional malpractice by failing to detect unlawful withdrawals made from the IP's investment account and to report the accounting irregularities.

US Fire settled with Raia, Rondos, and the R & R firm, and thereupon executed a release in favor of Raia, and a separate release in favor of Rondos and the R & R firm.

Raia moved, inter alia, for summary judgment dismissing C & C's cross claims insofar as asserted against her and pursuant to 22 NYCRR 130-1.1 for an award of attorney's fees.  The Supreme Court, in effect, granted those branches of the separate motions and denied the cross motion.

Raia, Rondos, and the R & R firm demonstrated their prima facie entitlement to judgment as a matter of law dismissing C & C's cross claim for contribution insofar as asserted against them. "A release given in good faith by the injured person to one tortfeasor as provided in [General Obligations Law § 15-108(a)] relieves him [or her] from liability to any other person for contribution as provided in article fourteen of the civil practice law and rules" (General Obligations Law § 15-108[b]). Here, US Fire, upon settling with Raia, Rondos, and the R & R firm, executed a release in favor of Raia, and a separate release in favor of Rondos and the R & R firm, and there is no evidence in the record indicating that the releases were not given in good faith. Thus, Raia, Rondos, and the R & R firm are relieved from liability to C & C for contribution (see Balkheimer v Spanton, 103 AD3d 603; Ziviello v O'Boyle, 90 AD3d 916, 917; Boeke v Our Lady of Pompei School, 73 AD3d 825, 826-827; Kagan v Jacobs, 260 AD2d 442, 442-443; Brown v Singh, 222 AD2d 392). In opposition, C & C failed to raise a triable issue of fact.

However, because C & C did not engage in frivolous conduct within the meaning of 22 NYCRR 130-1.1, the Supreme Court improvidently exercised its discretion in awarding attorney's fees pursuant to 22 NYCRR 130-1.1 (see South Point, Inc. v Redman, 94 AD3d 1086, 1087-1088; Joan 2000, Ltd. v Deco Constr. Corp., 66 AD3d 841, 842). "

 

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Lots of Fact Questions in this Legal Malpractice Case

One attorney represents a group of tenants / tenants-in-common in a construction project that runs afoul of the Department of Transportation in NYC.  The sticking point was whether a retaining wall, which the project sought to move was on City or private property.  In Wadsworth Condos LLC v Dollinger Gonski & Grossman   2014 NY Slip Op 00930   Decided on February 13, 2014   Appellate Division, First Department we see how plaintiff weaves a conflict of interest and affiadvits about how the attorneys sided with others, as well as demonstrating capacity to sue.
 

"Defendants preserved the defense that plaintiff lacked the capacity to sue derivatively on behalf of its co-tenant-in-common by asserting the defense in their answer (see CPLR 3211[a][3], 3211[e]; see also Security Pac. Natl. Bank v Evans, 31 AD3d 278 [1st Dept 2006], appeal dismissed 8 NY3d 837 [2007]). However, plaintiff adequately alleged injuries to the common entity and the futility of a demand thereon. "

"Plaintiff's belatedly asserted grounds for alleging legal malpractice may be entertained since they involve no new factual allegations and no new theories of liability, and there is little or no basis on which defendants could claim surprise or prejudice (see generally Alarcon v UCAN White Plains Hous. Dev. Fund Corp., 100 AD3d 431 [1st Dept 2012]; Valenti v Camins, 95 AD3d 519 [1st Dept 2012]). The new claims raise issues of fact whether defendants were negligent in their legal representation of the tenants-in-common, and whether, but for the alleged negligent representation, the tenants-in-common would have been able to avoid the extensive delays in project construction that resulted in the loss of the construction loan, construction delay expenses, and increased attorneys' fees. The tenants-in-common retained defendants initially to advise them with respect to a stop work order issued by the Department of Transportation (DOT) that prohibited further demolition until an appropriate permit was secured from DOT or the Department of Buildings. Rather than trying to secure a permit or obtain a definitive statement of the ownership of the retaining wall sought to be demolished, defendants reviewed a survey and deed and accepted DOT's position that the wall was on city property, and entered into what became protracted negotiations with DOT. In moving for summary judgment, defendants did not submit an expert legal opinion as to the ownership of the wall (which is not clear from the record) or whether the failure to seek a demolition permit rather than engage in negotiations constituted negligence, issues that are beyond the ken of the ordinary person (see Nuzum v Field, [*2]106 AD3d 541 [1st Dept 2013]; Cosmetics Plus Group, Ltd. v Traub, 105 AD3d 134, 141 [1st Dept 2013], lv denied 22 NY3d 855 [2013]).

As to the conflict of interest claim, while plaintiff was aware that defendants were representing the co-tenant-in-common, issues of fact exist whether defendants' actions on behalf of the co-tenant-in-common were in conflict with the interests of the tenants-in-common, particularly since the tenant-in-common management agreement called for unanimous consent on material changes in the project. For example, an affidavit submitted by plaintiff says that plaintiff was not given notice of the switch from a condominium project to a rental project, which the co-tenant-in-common undertook while being advised by defendants. "

 

 

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Fraud, LLPs, Individual Liability and Legal Malpractice

What is the difference between legal malpractice in tort and legal malpractice in contract, and how might an individual attorney in a LLP be liable for the fraud of another attorney?  Salazar v Sacco & Fillas, LLP   2014 NY Slip Op 00980   Decided on February 13, 2014   Appellate Division, Second Department has a simple fact pattern. 
 

"The plaintiff retained the defendants Sacco and Fillas, LLP (hereinafter the law firm), and attorneys Tonino Sacco and Elias Nikolaos Fillas, who allegedly were partners in the law firm, to represent him as a plaintiff in a personal injury action and to represent two corporate entities that he controlled, Always First, Inc., and Always Fast, Inc. (hereinafter together the Always companies), in connection with certain commercial litigation.

The law firm settled the personal injury action on behalf of the plaintiff, and received certain settlement proceeds on the plaintiff's behalf. Thereafter, the plaintiff and the Always companies, as "the client," and the law firm entered into an agreement (hereinafter the Settlement Agreement). The Settlement Agreement provided that, in exchange for the law firm's agreement to "discount outstanding balances" due the law firm from the Always companies, "the client" agreed to give up all rights to certain sums due "the client" from three enumerated litigations.

The plaintiff thereafter commenced the instant action, seeking to recover damages he allegedly sustained as a result of the defendants' legal malpractice, breach of contract, and fraud. The plaintiff alleges, inter alia, that the defendants breached the retainer agreement relating to the personal injury action in that they intentionally failed to pay him the settlement funds from that [*2]action. The plaintiff also alleges that he was fraudulently induced into signing the Settlement Agreement. "
 

Legal malpractice was dismissed because "Supreme Court, upon concluding that the complaint alleged intentional acts only, granted the defendants' motion only insofar as it sought to dismiss the first cause of action, sounding in legal malpractice."

But what of Breach of Contract and Fraud?  "The complaint adequately states a cause of action against the defendants sounding in breach of contract.

To state a cause of action sounding in fraud, a plaintiff must allege that "(1) the defendant made a representation or a material omission of fact which was false and which the defendant knew to be false, (2) the misrepresentation was made for the purpose of inducing the plaintiff to rely upon it, (3) there was justifiable reliance on the misrepresentation or material omission, and (4) injury" (Selechnik v Law Off. of Howard R. Birnbach, 82 AD3d 1077, 1078; see McDonnell v Bradley, 109 AD3d 592, 592-593). In the instant matter, the complaint alleged that Fillas, one of the attorneys representing the plaintiff and the Always companies, made certain false statements, including, inter alia, misrepresenting the amount of past-due attorney's fees owed by the Always companies, and falsely stating, in effect, that he could sue the plaintiff personally for the sums allegedly owed by the Always companies. The complaint further alleged that these statements were known by Fillas to be false at the time they were made, and were intended to deceive, coerce, and induce the plaintiff into entering into the Settlement Agreement, and that the plaintiff relied on these statements to his detriment. Accordingly, these allegations were sufficient to state a cause of action alleging fraud against Fillas and the law firm (see Partnership Law §§ 24, 25, 26[e]; Rabos v R & R Bagels & Bakery, Inc., 100 AD3d 849)."

When might the individual attorney be responsible for the fraud of another partner in an LLP? 

"However, the complaint fails to state a cause of action sounding in fraud against Sacco. As a general matter, Partnership Law § 26(a)(1) imposes joint and several liability upon all individual partners in a partnership for all obligations chargeable to the partnership under Partnership Law §§ 24 and 25, which are referable to wrongful acts committed by one or more partners of the partnership acting in the ordinary course of partnership business. Partnership Law § 26(b), however, immunizes from individual liability any partner in a partnership registered as a limited liability partnership who did not commit the underlying wrongful act, except to the extent that Partnership Law § 26(c) imposes liability on that partner where he or she directly supervised the person who committed the wrongful act and Partnership Law § 26(d) imposes liability on that partner where he or she had previously agreed to assume individual liability for wrongs committed by another partner. Although, at this stage of the litigation, the plaintiff " need only set forth sufficient information to apprise defendants of the alleged wrongs'" (Selechnik v Law Off. of Howard R. Birnbach, 82 AD3d at 1079, quoting DDJ Mgt., LLC v Rhone Group L.L.C., 78 AD3d 442, 443), the complaint fails to allege facts apprising Sacco of the basis of his individual liability. The complaint does not allege that Sacco personally committed a fraudulent act. Nor does the complaint allege that the law firm is a general partnership or that, as such, Sacco may be held individually liable pursuant to Partnership Law § 26(a)(1). Furthermore, the complaint does not allege that the law firm is a registered limited liability partnership, but that Sacco supervised Fillas in the commission of a fraudulent act, thus rendering Sacco individually liable pursuant to Partnership Law § 26(c), or that Sacco had previously agreed to assume personal liability for fraudulent acts committed by Fillas, thus rendering Sacco individually liable pursuant to Partnership Law § 26(d). The allegations in the complaint particularizing Fillas's fraudulent conduct, standing alone, are insufficient to state a cause of action sounding in fraud against Sacco (see Partnership Law § 26[b], [d]; Selechnik v Law Off. of Howard R. Birnbach, 82 AD3d at 1079). Accordingly, the Supreme Court should have granted that branch of the defendants' motion which was to dismiss the fraud cause of action insofar as [*3]asserted against Sacco. "

 

 

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A Hodgepodge of Legal Malpractice and Conflicts Issues

W.S. Corp. v Cullen and Dykman LLP  2014 NY Slip Op 30353(U)  February 5, 2014  Sup Ct, New York County  Docket Number: 654176/12  Judge: Marcy S. Friedman is a CPLR 3211 decision based upon a large number of claims.  Basically, its sibling v. sibling, each of which have enjoyed the benefits of a trust and income from a company.  Now they are at odds.  One law firm has helped for years and sided with the more alpha of the siblings.  Now, there is litigation.

"The action arises out of a dispute between siblings. The Baugher plaintiffs and their brothers, Jeffrey and Kirk Baugher, were all presumptive remainder beneficiaries of a trust. (Complaint 23.) Their mother, Phebe Baugher, was lifetime income beneficiary of the trust and a de facto trustee until her death on November 4, 2008. (Id., 22, 27.) Jeffrey was appointed by Phebe as a trustee and served in that capacity without official appointment by the Surrogates Court. (Id., 28.) In addition, he was a director of the Company's board, and was appointed as its president in January 2007' after the death of another brother who had been president. (Id.,46.) The complaint alleges that Cullen engaged in conflicted simultaneous representation of the Company on the one hand, and Jeffrey and Kirk on the other. (Id., 12.)


More particularly, the complaint alleges:
"Cullen aided and abetted Jeff in breaching his fiduciary duties as an officer and director of W.S. Wilson, and as a trustee of the trust that owned the Company, by engaging with him and/or Kirk to develop a strategy ("the Strategy") to exclude the Baugher Plaintiffs from the operation and management of the Company in order to ensure that a claim for more than $22 million of its retained earnings would be preserved for Phebe or Phebe's Estate, of which Kirk and Jeff became
the primary beneficiaries under a will that Cullen drafted and had Phebe execute days after being discharged from the hospital." (Id., 14.) Cullen allegedly gave legal advice to Jeffrey which he used as a basis for the Company not to hold meetings of the board of directors on which the Baugher plaintiffs had previously served. (Id., 16, 32-33, 56-70.) Cullen also allegedly gave legal advice to Jeffrey on the basis of which the Company did not recognize the Baugher plaintiffs as shareholders after the termination of the trust. (Id.,16.) As the complaint further alleges, Cullen's conflict of interest caused plaintiffs to become embroiled in numerous litigations and to incur legal fees that would not otherwise have been incurred. (Id., 237-241.)" 

"An attorney's conflict of interest, as a result of dual representation of clients in violation of the Code of Professional Responsibility (22 NYCRR 1200.24), does not alone support a cause of action for legal malpractice. However, '"liability can follow where the client can show that he ... suffered actual damage as a result of the conflict."' (Kaminsky v Herrick, Feinstein LLP, 59 AD3d 1, 13 [1st Dept 2008], Iv denied 12 NY3d 715, quoting Tabner v Drake, 9 AD3d 606, 610 '
[2d Dept 2004]; Pillard v Goodman, 82 AD3d 541, 542 [t5t Dept 2011]; Ulico Cas. Co. v Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d 1, 10 [1st Dept 2008].) In seeking dismissal, Cullen argues that its conduct was not the proximate cause of the cited litigations. (D. 's Memo. In Support at 14.) This issue cannot be determined as a matter of law on this record. The pleadings on their face allege Cullen's conflict of interest and damages in the form of attorney's fees incurred by the Company as a result. The documentary evidence, which consists of selected pleadings, decisions, or other papers in the various litigations in which Cullen allegedly had a conflict, does not demonstrate that the conflict did not result in damage to the Company. At least some of the litigations arguably involved a conflict of interest. For example, in July 2009, one month before Cullen withdrew as counsel for the Company, it filed a petition on behalf of Kirk, as preliminary executor of Phebe's Estate, seeking turnover of the Company's retained earnings from the trust. (Complaint, 186, 187.) While the lawsuit was brought against the trust rather than the Company,1 the estate and the Company arguably had differing interests with respect to the disposition of the retained earnings. Another example of a lawsuit that apparently involved a direct conflict was an Article 78 proceeding brought by plaintiffs Laraine and Lisa Baugher to compel Jeffrey, as president of the Company, to call a special meeting of the board of directors. The complaint alleges that although Cullen did not formally appear for Jeffrey in this proceeding, it assisted him in opposing the petition. (Id., 139-145.) Moreover, Jeffrey, in his official capacity as an officer of the Company, defended this proceeding based on advice that Cullen allegedly gave to him not to call a meeting of the board. (Id., 56- 70.)3 In contrast, some of the lawsuits arguably did not involve a conflict. For example, it is undisputed that Cullen did not represent Jeffrey in an arbitration of a wrongful termination claim (Arbitration) that he filed after some or all of the Baugher plaintiffs gained control of the board and terminated him. (Rice Aff., 33.)"

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A Huge Loss, and a Search for The Money

Pope Inv. II LLC v Belmont Partners, LLC  2014 NY Slip Op 30349(U)  February 4, 2014  Sup Ct, New York County  Docket Number: 651479/12  Judge: Jeffrey K. Oing is the story of a huge investment, a huge loss, and the search for missing monies. 

"A Securities Purchase Agreement, dated April 14, 2008, documented the AAXT Investment (Compl.,18). The Investor plaintiffs, along with other investors not named as plaintiffs, invested approximately $12.5 million in AAXT in exchange for 4,008,188 shares of AAXT's Series A Senior Convertible Preferred Stock (Id.). Of the $12.5 million, approximately $10,132,522.35 was left in net proceeds after fees were paid to Deheng and named defendants Guzov and Belmont (Compl., 24). In conjunction with the closing of the AAXT Investment, AAXT and SMT entered into the China Control Agreement (Compl., 23). SMT transferred all of the economic benefits and liabilities of
its business to Anhante in exchange for the net proceeds of the AAXT Investment, namely, $10,132,522.35 (Id.). Pursuant to the China Control Agreement, AAXT effectively became the  indirect beneficial owner of SMT (Id.).

After the AAXT Investment closed, Guzov placed the net proceeds, $10,132,522.35, in a Hong Kong & Shanghai Banking Corporation Limited ("HSBC") account under ABM's name for holding before they were transferred to SMT (Compl., 40, 45). Plaintiffs allege, however, that Shao and/or Kamick retained control of AMB and the bank account at issue, and that they were not aware that Shao and/or Kamick could exercise control over the net proceeds (Compl., 28). The complaint alleges that Shao embezzled most or all of the money in the ABM account within several days (Compl., 29)."

"The complaint also alleges that Shao and Lv had been  conspiring to embezzle the money invested in AAXT since 2007 (Compl., 31). On September 4, 2008, Lv, acting on Kamick's behalf, e-mailed Meuse and Luckman, asking that they act as a bridge between Kamick and the AAXT Investors to avoid legal action (Compl., 33). On September 18, 2008, Lv informed the AAXT Investors that their investment had been invested elsewhere, contrary to the Transaction Documents and SEC filings (Compl., 34). After Deheng had advised Kamick to transfer the net
proceeds out of ABM's account, Lv informed the AAXT investors in an e-mail dated October 9, 2008 that Deheng would no longer be representing Kamick (Compl., 35). According to the complaint,
after the net proceeds were removed from ABM's account, the funds were deposited into Shao's personal bank account, accounts of entities controlled by Shao, and an account controlled by Lv
(Compl., 37). "

The Group plaintiffs allege that Guzov and Ofsink committed legal malpractice by violating New York Rules of Professional Conduct Rule 1. 7 (b) ( 4) . That Rule requires a lawyer who has decided to represent two clients, regardless of an apparent conflict of interest, obtain written consent from each affected client. The Group plaintiffs claim that defendants Guzov and
Of sink represented AAXT and Kamick for the SMT Transactions without their written consent.
In support of dismissal of this claim, defendants Guzov and Ofsink rely on William Kaufman Org., Ltd. v Graham & James LLP, 269 AD2d 171, 173 (1st Dept 2000) to argue that "a violation of a
disciplinary rule does not generate a cause of action." That reliance is misplaced. That case also stands for the proposition that "some of the conduct constituting a violation of a disciplinary rule may also constitute evidence of malpractice" (Id.). Nonetheless, a violation of a disciplinary rule, standing alone and without more, does not generate a cause of action (Schafrann v N.V. Famka, Inc., 14 AD3d 363, 364 [1st Dept 2003]) The issue, thus, is whether there is more than just a violation of the Rule. A review of the complaint demonstrates that it does not
sufficiently plead what negligent conduct defendants Guzov and Of sink allegedly perpetrated to support the legal malpractice claim. Specifically, the allegations of failure to vet Shao and
[* 16] "disclose information surrounding Shao, his management of Kamick, and his personal relationship with Lv are insufficient to substantiate claims of attorney malpractice without allegations that such a duty existed and that these omissions were the proximate cause of the Group plaintiffs' damages."

"This broad and conclusory allegation, however, without more, is insufficient. Even if the Group plaintiffs were to contend that defendants were negligent by failing to conduct due diligence on
Shao and disclose information regarding his management of Kamick and his personal relationship with Lv, nowhere does the complaint allege that defendants had a duty to conduct such due diligence or disclose such information, and that this failure was the proximate cause of plaintiffs' damages. Accordingly, defendants' motion to dismiss the Group plaintiffs' legal malpractice claim (Count VI) is granted, and it is hereby dismissed without prejudice."

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The Tipping Point in a Legal Malpractice Case

In a legal malpractice case worth more than $60 Million, is it possible that the testimony of a single witness at a deposition can make the essential difference? 

In Nomura Asset Capital Corp. v Cadwalader, Wickersham & Taft LLP   2014 NY Slip Op 00954
Decided on February 13, 2014   Appellate Division, First Department   Richter, J. bear in mind that a major issue in the legal malpractice case is whether Defendant advised Plaintiff of the REMIC rules.  More than $60 million is at stake. Then read these paragraphs:
 

"Glick testified that she and Adelman had numerous discussions with Nomura's securitization team about REMIC requirements. She submitted an affidavit stating that before the D5 Securitization closed, Cadwalader provided Nomura with "detailed advice" as to how to satisfy the 80% test. As part of that advice, Glick told Nomura to add together the value of what was plainly REMIC real property, such as land and structural improvements. If that sum amounted to at least 80% of the loan amount, the 80% test would be met. If not, Glick advised Nomura that it should make further inquiries to determine whether the loan met the 80% test. Adelman also advised Nomura that it should consult with Cadwalader if it had any questions about a particular loan.

Perry Gershon, a former vice president of Nomura who was in charge of the D5 [*6]Securitization, confirmed that Cadwalader properly advised Nomura of the REMIC rules. He testified that prior to the D5 Securitization, Cadwalader told him, and he understood, that a REMIC loan needed to be secured by real property worth at least 80% of the loan, that real property includes land and buildings, but not personal property, and that the appraisals of the collateral securing the mortgage loans in  the trust had to separately value the real property.

The testimony of Adelman, Glick and Gershon satisfied Cadwalader's prima facie burden on summary judgment showing that the allegedly missing advice was in fact given to Nomura (see Stolmeier v Fields, 280 AD2d 342, 343 [1st Dept 2001], lv denied 96 NY2d 714 [2001] [rejecting failure to advise claim where the client's own deposition testimony showed he was aware of the advice]). Contrary to the motion court's conclusion, we find nothing inconsistent in Gershon's testimony. Gershon's alleged inability to succinctly articulate the REMIC rules during his deposition, which took place more than 10 years after the advice was given, does not refute his unrebutted testimony that Cadwalader advised him of the relevant rules at the time of the D5 Securitization. Nor does the fact that Gershon is married to one of the Cadwalader attorneys who worked on the transaction, standing alone, raise an issue of fact. At his deposition, Gershon made clear that his wife's employment at Cadwalader had no bearing on how he viewed the litigation. Nomura's current argument to the contrary would only be based on speculation. In any event, even if we were to discount Gershon's statements, the unchallenged testimony of Adelman and Glick shows that the proper REMIC advice was given.

Because Cadwalader met its prima facie burden on summary judgment, the burden shifted to Nomura "to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action" (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]). Nomura failed to satisfy that burden. It points to no documentary evidence directly refuting the testimony of Adelman, Glick and Gershon that the proper REMIC advice was given. Nor did any witness testify that Cadwalader specifically failed to advise Nomura that the appraisals for the D5 Securitization had to separately value the real property components of the asset in question.

Thus, the motion court should have granted summary judgment dismissing the advice claim. "
 

 

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More Fraud and Legal Malpractice Combos

Yesterday, we started to discuss how fraud and legal malpractice can exist side by side and not be "duplicitive."  In Johnson v Rose  2014 NY Slip Op 30262(U)  January 23, 2014  Sup Ct, NY County 
Docket Number: 652075/2011  Judge: Lawrence K. Marks we saw how plaintiffs claimed both fraud and legal malpractice in the tax shelters they got involved with.

"Defendants seek to dismiss plaintiffs' first cause of action as duplicative of the legal malpractice claim. It is well-settled that failure to disclose one's own malpractice, standing alone, does not give rise to a fraud claim separate from the customary malpractice action. See, e.g., Weiss v. Manfredi, 83 N.Y.2d 974, 977 (1994); Baystone Equities, Inc. v. Handel-Harbour, 27 A.D.3d 231, 231 (1st Dep 't 2006); Roswick v. Mount Sinai Med. Ctr., 22 A.D.3d 409, 410 (1st Dep't 2005).  Thus, a fraud claim asserted in connection with a claim for legal malpractice "is sustainable only to the extent that it is premised upon one or more affirmative, intentional misrepresentations -- that is, something more egregious than mere concealment or failure to disclose [one's] own malpractice." White of Lake George v. Bell, 251 A.D.2d 777, 778 (3d Dep't 1998) (internal quotation marks and citation omitted); accord Carl v. Cohen, 55 A.D.3d 478, 478-79 (1st Dep't 2008) (fraud claim may be dismissed as duplicative of a malpractice claim if it is '"not based on an allegation of independent, intentionally
tortious' conduct" and "fail[s] to allege 'separate and distinct' damages")"

"The Second Department recently held that an allegation that defendants "committed fraud by misrepresenting that they 'made a motion for a default judgment' when they 'never made, filed, or drafted' such a motion, and that they billed the plaintiff for drafting the motion" was not duplicative or redundant of the allegation that defendants "committed legal malpractice in failing to timely pursue [the] default judgment." Vermont Mut. Ins. Co. v. McCabe & Mack, LLP, 105 A.D.3d 837, 839 (2d Dep't 2013). The court noted that "[ w ]here, as here, tortious conduct independent of the alleged
malpractice is alleged, a motion to dismiss a cause of action as duplicative is properly denied." Id. at 840. Moreover, the apparent overlap in the amount of damages sought on both counts of action did not require dismissal. Id. at 838, 840.3 See also Simcuski v. Saeli, 44 N.Y.2d 442, 451-52 (1978) (determining that fraud claim was distinct from malpractice claim where defendant,  knowing it to be untrue yet expecting his patient to rely on his advice, advised her that physiotherapy would produce a cure, in consequence of which fraudulent misrepresentation the patient was deprived of the opportunity for cure of the condition initially caused by the doctor's alleged malpractice"). Particularly instructive is the First Department's decision in Mitschele v. Schultz,
36 A.D.3d 249, 254 (1st Dep't 2006). In that case, the plaintiff retained the accountant defendants to advise her regarding her tax status and tax liability as a United Statescitizen living and working abroad. The defendants advised plaintiff that her employer, whose president had introduced plaintiff to the defendants (one of whom was his cousin), should compensate plaintiff as an "outside contractor" and therefore withhold no taxes. When it was later revealed that this advice was erroneous and plaintiff incurred tax liabilities as a result, plaintiff sued, alleging a number of causes of action including accounting malpractice and fraud. Plaintiffs fraud cause of action alleged that defendants' advice was made not in an effort to serve her interests but for the sole benefit of her employer, to allow it to avoid payroll and other taxes and costs. On these facts, the
First Department rejected the defendants' contention that plaintiffs fraud claim was duplicative of her malpractice claim. As the court stated, "[D]efendants' alleged fraud is not simply the failure to disclose the malpractice based upon accounting errors. Rather, defendants are alleged to have perpetrated a fraud on plaintiff from the time they were retained to provide accounting services, in failing to disclose their concern with protecting the interests of another entity, namely, plaintiffs employer." Id. at 254. "

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Tax Shelters, Fraud and Legal Malpractice

Heirs to the Johnson & Johnson fortune decided that dividends and distributions were not sufficient, and entered into a tax shelter arrangement.  Naturally, it was disastrous, and ended in litigation.  In Johnson v Rose  2014 NY Slip Op 30262(U)  January 23, 2014  Sup Ct, NY County
Docket Number: 652075/2011  Judge: Lawrence K. Marks  we see how the Proskauer Rose LLP law firm engineered a big mess.  Today we will deal with the question of whether a fraud claim can exists side-by-side with a legal malpractice claim.

"Plaintiffs John Seward Johnson, Jr. ("Johnson") and his wife Joyce H. Johnson are Johnson & Johnson, Inc. stockholders who, along with other close affiliates and related entities, were clients of defendants at certain times relevant to the complaint. Through their attorney-client relationship with Johnson, defendants were aware of material aspects of plaintiffs' financial affairs, including plaintiffs' ownership of substantial amounts of Johnson & Johnson stock. Defendants approached Johnson (through Matthews) to offer him the opportunity to enter into a tax avoidance transaction with another Proskauer client, nonparty Diversified Group, Inc. ("Diversified"), which was in the business of selling tax planning strategies to high income parties. Defendants told Johnson that the transaction would allow plaintiffs to sell a large block of Johnson & Johnson stock in a manner that would minimize the payment of capital gains taxes. Johnson was realizing significant dividends on the stock up to that time, and had no plans to sell the stock before defendants approached him with the idea."

"Defendants seek to dismiss plaintiffs' first cause of action as duplicative of the legal malpractice claim. It is well-settled that failure to disclose one's own malpractice, standing alone, does not give rise to a fraud claim separate from the customary malpractice action. See, e.g., Weiss v. Manfredi, 83 N.Y.2d 974, 977 (1994); Baystone Equities, Inc. v. Handel-Harbour, 27 A.D.3d 231, 231 (1st Dep 't 2006); Roswick v. Mount Sinai Med. Ctr., 22 A.D.3d 409, 410 (1st Dep't 2005). Thus, a fraud claim asserted in connection with a claim for legal malpractice "is sustainable only to the extent that it is premised upon one or more affirmative, intentional misrepresentations -- that is, something more egregious than mere concealment or failure to disclose [one's] own malpractice." White of Lake George v. Bell, 251 A.D.2d 777, 778 (3d Dep't 1998) (internal quotation marks and citation omitted); accord Carl v. Cohen, 55 A.D.3d 478, 478-79 (1st Dep't 2008) (fraud claim may be dismissed as duplicative of a malpractice claim if it is '"not based on an allegation of independent, intentionally
tortious' conduct" and "fail[s] to allege 'separate and distinct' damages"); Atton v. Bier, 12 A.D.3d 240, 241-42 (1st Dep't 2004) (suggesting that an alleged failure to disclose one's own "general incompetence" is, in effect, "founded upon the same underlying allegations as the malpractice claim and seek essentially the same relief'). Mere allegations that defendants "furnished erroneous legal advice and neglected to take appropriate steps to safeguard [plaintiffs'] interests" do not suffice. White of Lake George, 251 A.D.2d at 778. However, not every claim for fraud is duplicative of a professional malpractice claim, even when both are asserted in the same action. For example, it is proper to deny a motion to dismiss a fraud claim as duplicative of a legal malpractice claim where "the fraud cause of action was based upon tortious conduct independent of the alleged malpractice, i.e., an alleged misrepresentation as to the eligibility of the defendant
[attorney] to practice law in the State of Florida, and the plaintiffs alleged that damages flowed from this conduct." Rupolo v. Fish, 87 A.D.3d 684, 685-86 (2d Dep't 2011); see also Burke, Albright, Harter & Rzepka, LLP v. Sills, 83 A.D.3d 1413, 1414 (4th Dep't 2011) (fraud counterclaim not duplicative of legal malpractice counterclaim where "[t]he proposed counterclaims are based on allegations that plaintiffs intended to deceive decedent, whereas the 'legal malpractice  counterclaim] is based on negligent conduct"'); Dischiavi v. Calli, 68 A.D.3d 1691, 1693 (4th Dep't 2009) (fraud claims not duplicative of legal malpractice claims where "plaintiffs have alleged that the fraud caused additional damages, separate and distinct from those generated by the alleged malpractice")"

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A Remarkable Case (Part 3)

Finally, in the case of Cabrera v Collazo  2014 NY Slip Op 00622  Decided on February 4, 2014
Appellate Division, First Department  Tom, J.  

How does the death of an attorney affect the relationship and the statute of limitations for the client's case?
 

"  Expansion of the record on a "more embracive and exploratory motion for summary judgment" (Rovello, 40 NY2d at 634) may or may not disclose facts demonstrating that, Tanzman was suddenly struck by a fatal and totally incapacitating episode of cancer rendering him unable to engage the services of another attorney to file a timely complaint on behalf of plaintiff or to communicate the necessity to do so. Thus, it would be premature to grant defendant's pre-answer motion and summarily dismiss the professional malpractice claim on the basis of the incomplete record before us (id.).

The cases relied upon in support of dismissal of the complaint state only that for the purpose of determining the limitations period for an action for professional malpractice, the statute of limitations begins to run on the date the client sustains injury (e.g. McCoy v Feinman, 99 NY2d 295, 301 [2002]; Glamm v Allen, 57 NY2d 87, 95 [1982]). These cases do not state that the severance of the attorney-client relationship, due to death of the attorney, prior to the accrual of the legal malpractice action deprives the client of any remedy for the inaction or negligence of the attorney which contributed to or resulted in the client's injury. The holding in these cases is not a bar to a legal malpractice claim against Tanzman for alleged failure, while he was alive, to notify plaintiff that he would be unable to file the summons and complaint in time or to enlist the attorneys in his firm to assist in this endeavor. This is especially so considering the short time period between the date of Tanzman's death and the expiration of the statute of limitations on plaintiff's underlying wrongful death action 11 days later.

Likewise, it has been held that the absence of any attorney-client relationship bars an action for attorney malpractice (e.g. Fortress Credit Corp. v Dechert LLP, 89 AD3d 615, 616 [1st Dept 2011], lv denied 19 NY3d 805 [2012] [allegedly faulty legal opinion relied upon was prepared by law firm retained by third parties, not by plaintiff]), as does the severance of the attorney-client relationship prior to any act of malpractice (e.g. Clissuras v City of New York, 131 AD2d 717 [2d Dept 1987], appeal dismissed 70 NY2d 795 [1987], appeal dismissed, cert denied 484 US 1053 [1988] [attorney withdrew after arranging for client's consultation with an actuary regarding her claim involving disputed calculation of pension benefits]). Similarly, such cases do not go so far as to hold that an attorney is absolved of liability for his part in permitting a statute of limitations to run against a client. To the contrary, in Clissuras, this Court expressly noted that counsel had withdrawn from representing the plaintiff "after advising her of the four-month Statute of Limitations" (id. at 719). Indeed, in Mortenson v Shea (62 AD3d 414, 414 [1st Dept 2009]), we noted that attorneys may be held liable for, inter alia, "neglect to prosecute an [*6]action." We stated that in pursuing an action on behalf of the plaintiff, the defendants created the impression that his claim remained viable and, under those circumstances, "defendants had a duty, at a minimum, to expressly advise plaintiff that a limitations period existed," including the need to take the necessary steps to ensure that an action was timely commenced (id. at 415). Whether Mortenson establishes an affirmative duty to advise a client with respect to the running of a limitations period, which the parties dispute, is not a question requiring immediate resolution. What Mortenson signifies is that an attorney will be held accountable for any misconduct that contributes to damages incurred because a statute of limitations is allowed to expire against a client. "

 

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A Remarkable Case (Part 2)

In Cabrera v Collazo  2014 NY Slip Op 00622  Decided on February 4, 2014  Appellate Division, First Department  Tom, J. the question of when the statute of limitations commences and the effect of the death of an attorney.
 

"In late September, Tanzman filed a certificate of lateness with Surrogate's Court stating that "another attorney" had been contacted initially by the family and "did nothing on the file for over a year." It was followed by a letter of September 30, 2010 asking that letters of administration be issued "as soon as is possible because there is a wrongful death matter associated with the above-named decedent and the Statute of Limitations will be expiring shortly." Surrogate's Court issued letters of limited administration on October 6. On October 14, Collazo was sentenced to 24 months' imprisonment on the federal immigration and visa fraud charges [FN2]. On October 24, Tanzman died at Memorial Sloan-Kettering Cancer Center, and the statute of limitations on plaintiff's wrongful death action expired 11 days later on November 4. No complaint was ever filed on behalf of plaintiff, and this action for professional malpractice ensued.

Other than a death certificate, there is no evidence concerning Tanzman's treatment or the course of his illness or when he was hospitalized. Nor is there any information about the nature of his law practice, beyond a letterhead that identifies three other attorneys as "of counsel." While it is clear from the letter dated September 30, 2010 that Tanzman was aware of the impending expiration of the statute of limitations against his client, it is unknown whether he took any steps to prepare a complaint for filing or whether he attempted to enlist the assistance of any other attorney including the attorneys of counsel in his firm.

According to the Tanzman defendants, neglect of a client matter by an attorney is not actionable if, as here, the attorney dies before the applicable limitations period runs against the client. Granted, it has been held that, for the purpose of determining the timeliness of a professional malpractice action, the action accrues "when all the facts necessary to the cause of action have occurred and an injured party can obtain relief in court." That a cause of action might accrue when the plaintiff actually sustains a loss, however, does not require the conclusion that an attorney is absolved of responsibility for any and all consequences of his neglect of the matter simply because it occurred prior to accrual of an actionable claim. Giving plaintiff the benefit of every possible favorable inference that can reasonably be drawn from the pleadings (Rovello v Orofino Realty Co., 40 NY2d 633, 634 [1976]), as we must on a pre-answer motion to dismiss (see Arrington v New York Times Co., 55 NY2d 433, 442 [1982], cert denied 459 US 1146 [1983]), it appears that the inaction of counsel rendered the lapse of plaintiff's cause of [*4]action not merely possible — or even probable — but inevitable. On a motion directed at the sufficiency of the pleadings, the issue is whether the facts alleged fit within any cognizable theory of recovery, not whether the complaint is artfully pleaded (see Hirschhorn v Hirschhorn, 194 AD2d 768 [2d Dept 1993]), and the circumstances of this matter do not warrant dismissal of the action, at this juncture, as against the Tanzman defendants.

The extent of the duty imposed on the attorney to commence a timely action depends on the immediacy of the running of the statutory period, and no duty will be imposed where sufficient time remains for successor counsel to act to protect the client's interests in pursuing a claim (see Golden v Cascione, Chechanover & Purcigliotti, 286 AD2d 281 [1st Dept 2001] [defendant law firm relieved 2½ years before claim expired]). Where, as here, the expiration of the statute of limitations is imminent and the possibility that another attorney might be engaged to commence a timely action is foreclosed, there is a duty to take action to protect the client's rights.

Plaintiff is entitled to the inference that Tanzman died as a result of a chronic, terminal illness that he knew, or should have known, presented the immediate risk that his ability to represent his clients' interests might be impaired (see Yuko Ito v Suzuki, 57 AD3d 205, 207 [1st Dept 2008]). Here, defendants offered no evidence to elaborate on the cause or circumstances surrounding Tanzman's death. The submitted certificate of death for Tanzman merely states that Tanzman passed away on October 24, 2010 at Memorial Sloan-Kettering Cancer Center. The record suggests that plaintiff had cancer, and that his death may have been foreseeable, but the nature and duration of his illness cannot be determined from the death certificate and defendants' other submissions. Further, the record reflects that Tanzman was well aware that Collazo could not be relied upon to assist with plaintiff's representation. According to Tanzman's own statement, Collazo had done nothing on the matter in over a year, and Tanzman's retainer agreement assigned Collazo only a limited role in the case. In any event, as of September 2010, when Tanzman expressed his concern over the running of the statute of limitations in a letter to Surrogate's Court, Collazo had been convicted on a federal criminal offense and was facing sentencing and disbarment. Plaintiff is entitled to the factual inference that, at this late juncture and mindful of his ill health, Tanzman was aware of the need to prepare and file a complaint or to arrange for one to be filed as soon as the necessary letters of administration were received. The letters of administration was issued on October 6, 2010. Tanzman neither filed a complaint nor engaged another attorney to file one in his stead despite the availability of three attorneys associated with the firm as of counsel.

No discovery has been conducted and, in the absence of any evidence that the onset of Tanzman's final episode of illness was sudden, unanticipated and completely debilitating, the failure to seek assistance with the filing of a timely complaint represents a failure to protect plaintiff's interests. Further, plaintiff was not informed that the statute of limitations was about to expire so that she could protect her claim. Milagros Cabrera stated that in August 2011, eight months after the statute of limitations of plaintiff's cause of action had expired, Tanzman's law office mailed the case file to her in response to her efforts to learn the status of the matter. It was then that Cabrera for the first time learned that Tanzman was deceased. She later discovered, [*5]after consultation with another law office, that plaintiff's claims were time-barred and that Collazo was incarcerated. Finally, even if plaintiff had been put on notice to engage another attorney to initiate the wrongful death action, no means are identified by which the case file might have been obtained from the Tanzman firm to permit substitute counsel to file a timely complaint. In short, while the statute of limitations had not yet run at the time of Tanzman's death, nothing in the record suggests that there was any available means by which plaintiff might have preserved her wrongful death action. According the facts their most favorable intendment, at the time of Tanzman's death, the running of the statute of limitations against his client was a foregone conclusion because intervention by substitute counsel was not possible. "

 

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A Remarkable Defense That Shocks the First Department

Three concepts are discussed in this very unusual legal malpractice case.  The first is the relationship between attorneys withdrawing and their duties to clients, the second is the effect of an attorney's death (and how he died) on the client's interests, and the third is when the statute of limitations commences. From Cabrera v Collazo  2014 NY Slip Op 00622  Decided on February 4, 2014  Appellate Division, First Department .
 

First, the death of an attorney.  "The remarkable defense proffered in this professional malpractice action is that an attorney who neglects a matter so that the statute of limitations runs against his client cannot be held legally accountable if the attorney happens to expire before the applicable limitations period. A cause of action for attorney malpractice requires: " (1) the negligence of the attorney; (2) that the negligence was the proximate cause of the loss sustained; and (3) proof of actual damages'" (Kaminsky v Herrick, Feinstein LLP, 59 AD3d 1, 9 [1st Dept 2008], lv denied 12 NY3d 715 [2009], quoting Mendoza v Schlossman, 87 AD2d 606, 606-607 [2d Dept 1982]). The pleadings, as "[a]mplified by affidavits and exhibits in the record" (Crosland by New York City Tr. Auth., 68 NY2d 165, 167 [1986]), contain allegations from which these elements can be made out and, thus, state a viable cause of action so as to survive a pre-answer motion to dismiss the complaint.

This legal malpractice action was brought by plaintiff Milagros Cabrera against defendants Shelley B. Levy, as executor of the estate of Cary M. Tanzman, Esq., and the Law Office of Cary M. Tanzman (collectively, the Tanzman defendants) and Salvador Collazo, who participated in plaintiff's representation. The Tanzman defendants brought a pre-answer motion to dismiss the complaint for failure to state a cause of action based on documentary evidence (CPLR 3211[a][1], [7]), particularly Cary Tanzman's death certificate. The gravamen of their defense is that since the attorney-client relationship was terminated by Tanzman's death on October 24, 2010, Tanzman and his law firm cannot be held liable for any damages sustained by plaintiff as a result of the subsequent running of the statutory limitations period on November 4, 2010 (EPTL 5-4.1[1]).

According to the Tanzman defendants, neglect of a client matter by an attorney is not actionable if, as here, the attorney dies before the applicable limitations period runs against the client. Granted, it has been held that, for the purpose of determining the timeliness of a professional malpractice action, the action accrues "when all the facts necessary to the cause of action have occurred and an injured party can obtain relief in court." That a cause of action might accrue when the plaintiff actually sustains a loss, however, does not require the conclusion that an attorney is absolved of responsibility for any and all consequences of his neglect of the matter simply because it occurred prior to accrual of an actionable claim. Giving plaintiff the benefit of every possible favorable inference that can reasonably be drawn from the pleadings (Rovello v Orofino Realty Co., 40 NY2d 633, 634 [1976]), as we must on a pre-answer motion to dismiss (see Arrington v New York Times Co., 55 NY2d 433, 442 [1982], cert denied 459 US 1146 [1983]), it appears that the inaction of counsel rendered the lapse of plaintiff's cause of [*4]action not merely possible — or even probable — but inevitable. On a motion directed at the sufficiency of the pleadings, the issue is whether the facts alleged fit within any cognizable theory of recovery, not whether the complaint is artfully pleaded (see Hirschhorn v Hirschhorn, 194 AD2d 768 [2d Dept 1993]), and the circumstances of this matter do not warrant dismissal of the action, at this juncture, as against the Tanzman defendants. "

We will continue with this Case in the next post.

 

 

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Boomers, Real Estate, True Love and Legal Malpractice

Anyone reading the case of Charell v Brenig   2014 NY Slip Op 30304(U)  January 27, 2014
Sup Ct, New York County  Docket Number: 158589/12  Judge: Joan A. Madden will see the dangers in romance and how true love might turn out.  A New Yorker will recognize the questions of real estate, rent stabilized apartments, and the relationship of Manhattan to the outer boroughs (place of "inferior apartments.")  An attorney will see the relationship of hiring an attorney and legal malpractice.

"Defendants F. Avril Brenig and Julian Lowenfeld, Esq. move for an order pursuant to CPLR 321 l(a)(5) and (7 ), dismissing the complaint on the grounds of statute of frauds and failure to state a cause of action. Defendants also seek an award of costs and attorney's fees as sanctions for frivolous litigation. 1 Plaintiff Ralph C~arell opposes the motion.  In March 2012, plaintiff Charell and defendant Brenig met through the Internet dating site Match.com and began a romantic relationship. At the time, plaintiff was 82 years old, and defendant, a retired widow, was 73 years old. In September 2012, plaintiff moved into Brenig's Mitchell Lama apartment at 150 West 96th Street. Plaintiff alleges that in mid-October 2012, Brenig told him she "changed her mine" and "no longer wanted to cohabitate with him." On October 22, he voluntarily left the apartment after Brenig summoned the police. In November 2012, plaintiff commenced this action, asserting first and second causes of action against Brenig for breach of contract and promissory estoppel, third and fourth causes of action against Brenig and Lowenfeld for fraud and intentional infliction of emotional distress,  and fifth and sixth causes of action against Lowenfeld for legal malpractice and professional negligence. The complaint alleges Brenig "induced" plaintiff to surrender his rent stabilized apartment at 311 East 72nd Street, and he relied upon her representations that if he moved into her apartment, she would "provide him with a room in her apartment for the rest of his life," he would "become a 'cooperator' on the proprietary lease, and participate in the profits if the building was converted," he would be "added" to her will, and they "would share equally in living expenses." Plaintiff alleges Brenig told him that if the relationship did not work out, he could "reside in the middle bedroom for the rest of his life," and assured him that "under no circumstances would he be asked to vacate the apartment." He alleges his rent stabilized apartment had a rental value of less than 40% of market value, resulting in damages in.excess of $150,000, and that he abandoned "much of his personal property, including furniture, books paintings, and collectibles" worth more than $25,000. Plaintiff alleges that on October 15, 2012, Brenig invited defendant Lowenfeld, an attorney, to the apartment, who introduced himself "as a mediator tasked with crafting a mutually acceptable separation between plaintiff and Brenig." The complaint alleges Lowenfeld specially  stated he was not Brenig's attorney, "but rather a mediator acting on behalf of both parties." Plaintiff alleges Lowenfeld conducted two mediation sessions on October 15 and 16, during which Lowenfeld "misrepresented plaintiffs legal rights, stating definitively that plaintiff had no right to reside" in Brenig's apartment and that he should begin looking for a new apartment immediately. The complaint alleges that on October 22, Lowenfeld told plaintiff that he was not a neutral mediator, but Brenig's attorney, and that he had contacted the police and plaintiff had two choices, to leave the apartment immediately, or be escorted out by the police. Lowenfeld then called the police, who escorted plaintiff out of the apartment. Plaintiff alleges he packed just one suitcase,"and Lowenfeld told him his remaining property would be moved to a storage unit the next day. Plaintiff alleges he checked into a hotel, "began to experience severe chest palpitations," and, believing he was having a heart attack, he went to the emergency room where he was diagnosed with "tachycardia,  palpitations and   hypertension." He alleges that prior to that time, he had never suffered any of those ailments. He also alleges he was caused to suffer severe anxiety and extreme emotional distress by the "daunting task of finding an apartment he could afford and figuring out a way to maintain even a modest standard of living," and he is now living in an "inferior apartment in Astoria, Queens." He alleges that "by reason of the mistreatment and elder abuse described above, he was forced to spend thousands of dollars to replace several personal items he had discarded," and is "also living under continuous, severe stress that has adversely affected his health." "

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The Rare Case of Plaintiff's Summary Judgment in Legal Malpractice

Board of Mgrs. of Bridge Tower Place Condominium v Starr Assoc. LLP   2013 NY Slip Op   7684 [111 AD3d 526]     Appellate Division, First Department  teaches three important lessons in a very short decision. The simple facts of the case are that defendant attorneys drafted a stipulation which stripped plaintiff of the right to amend its bylaws to attain a specific result in the underlying case. Plaintiffs successfully moved for summary judgment on the issue of liability and dismissed defendant's' affirmative defense of comparative fault.
 

Lesson 1:  In this case no expert is necessary to establish that defendants' conduct fell below the standard of the professions generally.

Lesson 2:  This was a case in which "but for causation' could be found as a matter of law.  (rare indeed)

Lesson 3:  Even though the Board President was an attorney, he relied upon defendants to draft the stipulation, and cannot be held in comparative fault.

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Professional Malpractice Claims Largely Dismissed in a Construction Negligence Case

Condominiums and co-ops occupy the greatest portion of  New Yorker's real estate world.  Many believe that new construction is the jewel of that grouping, and will purchase a unit well before completion.  New owners depend on the reputation of the sponsor.  How the building will come out is an open question, and in Board of Mgrs. of the 125 N. 10th Condominium v 125 N. 10, LLC
2014 NY Slip Op 50035(U)   Decided on January 6, 2014   Supreme Court, Kings County   Demarest, J.  we see what happens after the residents predominate on the board and the sponsor no longer has control.  It's not a pretty sight.
 In this case there a a very large number of parties, and an even larger number of motions.  Read on, and see how the claims are mostly dismissed, even after the complaint alleges that "According to plaintiff, Sponsors, however, did not deliver a Building in accordance with the Plans and Specifications set forth in the Offering Plan, but, instead, the building was "rife with construction problems," including improperly designed and constructed walls, roofs, and foundation, which have resulted in water infiltration and significant property damage, as well as non-compliance with New York City Department of Building ("DOB") Codes. Other issues complained of include scalding hot water that flows through the residential fixtures, the persistent break down of the building's heating and cooling systems, severe drafts from the windows, extensive leaking from ceilings, flooding in the cellar garage, noxious odors permeating the units, and a dangerous condition created by terrace railings at the top of the ten-story building, which are designed so that it is possible for children to climb over them.

When the defects were discovered, the Sponsor-controlled board requested that all defendants return to the Building to inspect their designs, plans, and work, to determine how to rectify the problems. However, despite numerous inspections, plaintiff claims that the defects remained unresolved. Accordingly, in 2011, the Board, which was no longer Sponsor-controlled,[FN2] retained a non-party firm, RAND Engineering & Architecture, P.C. (" Rand") to perform a visual survey of the building to determine the cost of making repairs, which were estimated to cost at least $2 million. Plaintiff claims to have performed essential repairs to the roof, in addition to other repairs, which have cost much more than estimated by Rand. Despite these expenditures, plaintiff contends, numerous defects still require repair. Finally, plaintiff refers to a case recently filed in Kings County wherein an individual named Tirpak names the Board as defendant, alleging that by reason of a dangerous and defective condition existing on the roof in violation of DOB code, he fell from the roof and was paralyzed from the waist down. "
 

Here are the results:  As all of plaintiff's claims are dismissed as to Penmark, the complaint against Penmark is dismissed with leave to plaintiff to replead with respect to any viable contract causes of action related to the Management Agreement.

As all of plaintiff's claims against Scarano Defendants are dismissed, the complaint is dismissed as to Scarano Defendants.

As all of plaintiff's claims against Cucich Defendants are dismissed, the complaint is dismissed as to Cucich Defendants.

As all of plaintiff's claims against Seta Defendants are dismissed, the complaint is dismissed as to Seta Defendants.

As all of plaintiff's claims are dismissed as to Simon Schwartz, individually, the complaint is dismissed only as to Simon Schwartz, individually, without prejudice to his litigating his cross and counterclaims against the remaining parties.

As all of plaintiff's claims are dismissed as to Jaccarino, the complaint is dismissed as to Jaccarino, individually.

As all of plaintiff's claims against Sharon Defendants are dismissed, the complaint is dismissed as to Sharon Defendants.

As all of plaintiff's claims against AE Design are dismissed, the complaint is dismissed as to AE Design.

All cross claims against the moving defendants are dismissed without prejudice to an aggrieved defendant bringing a third party action against a co-defendant who has been dismissed from this case as a result of this decision.

This constitutes the decision and order of the Court. "

 

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Would An Investigation Have Made a Difference?

An unsophisticated client, a personal injury and an attorney who does not investigate the case.  These are the facts in Angeles v Aronsky   2013 NY Slip Op 02454 [105 AD3d 486]   Appellate Division, First Department . 
 

"On December 7, 2007, at approximately 3:15 p.m., plaintiff entered the front entrance of the apartment building where he lived and, immediately upon reaching the lobby, was hit in the jaw. Although there were no witnesses to the actual attack, a neighbor, Teresa Luna, who was standing outside the building around the time of the incident, saw three men run out the front entrance. Two of the men were holding baseball bats. Luna, who had lived in the building for about five years, did not recognize any of the men. Plaintiff also did not recognize the men, whom he observed briefly before he lost consciousness following the assault.

On the day of the incident, plaintiff admits that the door locked behind him when he left the building around 2:55 p.m. and that he had to unlock it with his key when he returned a short time later. On the side of the building there is a door to the laundry room, which is located in the basement. This door remains unlocked between 9:00 a.m. and 6:00 p.m. From the laundry room, a person can access the lobby without a key by using the elevator.

Shortly after the attack, plaintiff retained defendant to represent him in a potential personal injury case. According to defendant, an investigator from his office initially interviewed plaintiff at the hospital. Defendant asserts that he later spoke with plaintiff over the phone to review the information plaintiff had given the investigator. Plaintiff told defendant that the front door was locking properly on the day he received his injuries and mentioned no other entrances. Defendant accepted plaintiff's statements concerning the security of the building, and did not send an investigator to inspect the premises or visit the premises himself. Also, he did not interview the superintendent."

The case settled, but plaintiff says that he was compelled to settle at a low value.  "A client is not barred from a legal malpractice action where there is a signed "settlement of the underlying action, if it is alleged that the settlement of the action was effectively compelled by the mistakes of counsel" (Garnett v Fox, Horan & Camerini, LLP, 82 AD3d 435, 435 [1st Dept 2011] [internal quotation marks omitted], quoting Bernstein v Oppenheim & Co., 160 AD2d 428, 430 [1st Dept 1990])."
 

"In this specific case, given plaintiff's lack of sophistication and his limited education, defendant's statement that he never conducted any investigation, except for speaking to plaintiff for a very limited time, raises a question of fact as to whether defendant adequately informed himself about the facts of the case before he conveyed the settlement offer. Furthermore, defendant says he told plaintiff, when he conveyed the settlement offer, that it was a "difficult liability case." It is difficult to understand, on the record before us, how he made that assessment without going to the building, or speaking to the superintendent. Because the evidence on a defendant's summary judgment motion must be viewed in the light most favorable to plaintiff (Branham v Loews Orpheum Cinemas, Inc., 8 NY3d 931 [2007]), we find there are questions of fact as to whether the attorney failed to exercise the ordinary reasonable skill appropriate under the circumstances."

 

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Too Many Possibilities for Summary Judgment in this Legal Malpractice Case

The essential question in a summary judgment motion is whether after hearing all the arguments, there are still questions of fact upon which reasonable minds differ.  If so, then no summary judgment.  So it is in Arbor Realty Funding, LLC v Herrick, Feinstein LLP   2013 NY Slip Op 01216 [103 AD3d 576]   Appellate Division, First Department . 
 

Legal malpractice case is brought by lender who argues that it would not have made a loan to developer but for negligent legal advice.  "Defendant argues that even if, but for its allegedly erroneous legal advice as to zoning issues, plaintiff would not have made bridge loans to the developer of a residential tower at 303 East 51st Street in Manhattan, plaintiff cannot establish legal malpractice or negligent representation because it cannot demonstrate that the zoning advice proximately caused its loss on the defaulted loans. Plaintiff made the loans in mid-2007. Defendant contends that the crane collapse at the project site in March 2008, which killed seven people, the market collapse beginning in late 2007 and continuing through 2008, and plaintiff's insufficient response to the Department of Buildings letter notifying plaintiff of its intent to revoke the project's building permits, constituted intervening events that severed the causal link between defendant's zoning advice and plaintiff's loss (see Derdiarian v Felix Contr. Corp., 51 NY2d 308 [1980]).

There is, however, evidence in the record that raises an issue of fact as to causation (see Brooks v Lewin, 21 AD3d 731, 734 [1st Dept 2005], lv denied 6 NY3d 713 [2006]). It appears [*2]that potential takeout lenders had concerns about the zoning issues even before March 2008. To the extent later events contributed to plaintiff's loss, they are properly considered by a fact-finder (see e.g. Schauer v Joyce, 54 NY2d 1 [1981]). "
 

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Legal Malpractice Took Place Who Knows When

Plaintiff brings a legal malpractice action based upon a series of real estate closings.  His  2011 complaint strikingly fails to  say when the attorney last represented him.  Result?  In Elmakies v Sunshine   2014 NY Slip Op 00478   Decided on January 29, 2014   Appellate Division, Second Department the case is dismissed on the statute of limitations.
 

"The instant action to recover damages for legal malpractice and breach of fiduciary duty was commenced in December 2011. The complaint does not allege when the conduct giving rise to these causes of action occurred.

The defendant Jeffrey Sunshine and his law firm, Jeffrey Sunshine, P.C. (hereinafter together the Sunshine defendants), moved, inter alia, pursuant to CPLR 3211(a)(5) to dismiss the complaint insofar as asserted against them as time-barred. In support of the motion, Sunshine submitted an affidavit stating that his firm "was retained to represent the plaintiff Downstate Elmira Acquisiton Corp. in a series of real estate closings for the purchase of properties in Elmira, New York," and "[t]to the best of my recollection, the last closing took place on October 5, 2007." In support of that claim, Sunshine submitted a copy of a closing statement dated October 5, 2007.

In opposition, the plaintiff Nissim Elmakies submitted an affidavit stating that Sunshine acted as his business attorney, and was in "continuous communication regarding my investment." However, the last communication with Sunshine alleged by the plaintiffs was a facsimile transmission dated December 7, 2007.

The Sunshine defendants made a prima facie showing that the three-year statute of limitations for legal malpractice (see CPLR 214[6]) expired before the action was commenced, and the plaintiffs failed to raise a question of fact in opposition (see Hadda v Lissner & Lissner LLP, 99 AD3d 476, 477). Further, since the plaintiffs seek monetary relief for the alleged breach of fiduciary duty, the statute of limitations for that cause of action is also three years (see IDT Corp. v Morgan Stanley Dean Witter & Co., 12 NY3d 132, 139). That cause of action was based on the same facts underlying the legal malpractice cause of action and, therefore, was time-barred (see Vermont Mut. Ins. Co. v McCabe & Mack LLP, 105 AD3d 837, 839; Tsafatinos v Lee David Auerbach, P.C. , 80 AD3d 749, 750). "

 

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Spoliation of Evidence and the Aftermath

In Scekic v SL Green Realty Corp.   2014 NY Slip Op 30186(U)  January 21, 2014  Sup Ct, New York County  Docket Number: 113386/10  Judge: Doris Ling-Cohan a worker is injured while up on a 15 foot ladder which suddenly splits apart.  He falls, and a Labor Law 240(1) case is born.  but, what happened to the ladder, and how does that affect the case.  More importantly, was it the obligation of any attorney to preserve or seek to preserve the ladder?

"This action arises out of a construction site accident. Plaintiff Zoran Scekic, a steamfitter, was allegedly injured on September 30, 2010 when the ladder he was standing on split in two, causing him to fall 15 feet to the floor. Plaintiff and his wife, Vesna Scekic (together, plaintiffs), subsequently commenced this action seeking recovery for violations of Labor Law § § 240 ( 1 ), 241 (6), 200 and for common-law negligence.  Plaintiff testified at his deposition that he was working as a  teamfitter for FL Mechanical on the date of his accident (Plaintiff EBT Transcript, at 27). According to plaintiff, FL Mechanical provided all of his tools and equipment except for hand tools (id. at 34). While he was looking through blueprints, a supervisor named Mike from Structure Tone called him and told him that a pipe needed to be raised that was too low (id. at 45-46). Plaintiff testified that the pipe needed to be raised because the contractors could not put the ceiling below that pipe (id. at 47). Plaintiff told Mike that he needed a ladder to reach that 15-foot height because FL -3- [* 4]
Mechanical had already sent back its ladder that would have been tall enough to reach that area a
week or two earlier (id. at 47, 141). Mike then pointed to a ladder and told plaintiff to "use that ladder" (id. at 48). The ladder, which plaintiff described as an extension ladder, was located about 30 or 40 feet away (id at 48, 49). Plaintiff further testified that while he was on the ladder and tightening bolts, "the ladder broke up somehow," and "just split, you know, in two pieces," causing him to fall (id. at 52, 55, 59). Plaintiff was not wearing a harness at the time of his accident (id. at 59). Plaintiff testified that he only received instructions from Mike and his boss Silvio as to what to do on the job (id. at 128)."

"Plaintiffs move to strike Structure Tone's answer based upon spoliation of evidence. In support, plaintiffs contend that Structure Tone's superintendent, Michael Sansone, observed plaintiff and the ladder lying on the ground in two pieces after the accident, but did nothing to preserve the ladder. Plaintiffs maintain that Sansone was on notice that plaintiff would commence a lawsuit as a direct result of the accident. In opposition, the Structure Tone defendants contend that Structure Tone did not destroy the ladder; rather, Schindler destroyed the ladder on the date of the accident. The  structure Tone defendants argue that plaintiff never demanded production of the ladder, and that there is no need to preserve the ladder for a Labor Law§ 240 (1) claim. In any event, the Structure Tone defendants contend that they produced copies of photographs of the ladder that were  identified at the depositions (Levien Affirm. in Support, Exh. 20). "Under New York law, spoliation sanctions are appropriate where a litigant, intentionally or negligently, disposes of crucial items of evidence involved in an accident before the adversary has an opportunity to inspect them" (Kirkland v New York City Housing. Auth., 236 AD2d 170, 173 [1st Dept 1997]). In determining the sanction to be imposed on a spoliator, the court must examine the extent that the non-spoliating party is prejudiced by the destruction of the evidence and whether dismissal is warranted as "a matter of elementary fairness" (id. at 175 [internal ·quotation marks and citation omitted]). Striking a pleading is warranted only where the loss of the evidence leaves the affected party without the means to prosecute or defend the action (see Tommy Hilfiger, USA v Commonwealth Trucking, 300 AD2d 58, 60 [1st Dept 2002]). However, where there is independent evidence that permits a party to adequately prepare its case, a less drastic sanction is appropriate (see e.g. Jfraimov v Phoenix Indus. Gas, 4 AD3d 332, 333-334 [2d at 2004] [negative inference charge for destruction of truck and propane tanks]). ere, plaintiffs' request to strike Structure Tone's answer is denied. It is undisputed that the ladder was destroyed after the accident. However, plaintiffs have not shown that Structure Tone destroyed the ladder. Structure Tone's project superintendent, Michael  Ransone, testified that Structure Tone did not destroy the ladder, and that he heard that Schindler destroyed the ladder based upon superstition in the trade (Sansone EBT, at 38-40). In any case, plaintiffs have ·not demonstrated that they are without the means to prosecute any of their claims based upon the loss of this evidence."

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Good Practice and Its Application to Legal Malpractice

It's said that there is a general level of good practice standards for attorneys in New York, and its well settled that all attorneys are expected to practice at the level (admittedly not the very highest level) of good practice among competent attorneys in New York.  What does this actually mean?

The question of how a competent and qualified attorney would handle a case is the crux of Bua v Purcell & Ingrao, P.C. 2012 NY Slip Op 06908  Appellate Division, Second Department . At issue is whether attorney committed malpractice in the termination of a real estate contract of sale.

"The plaintiff commenced this action to recover damages allegedly sustained as a result of the defendants' legal malpractice. The amended complaint alleged that the plaintiff retained the defendants to represent and advise him in connection with the sale of certain real property. The plaintiff entered into a contract of sale with a buyer, who tendered a deposit to be held in escrow. The amended complaint further alleged that, prior to the closing date, the buyer's attorney attempted to terminate the contract of sale because the buyer was unable to obtain financing for the purchase. The defendant Joseph A. Ingrao informed the plaintiff that the buyer wished to cancel the contract of sale, and the plaintiff agreed to cancel the contract and return the deposit.

The amended complaint stated that Ingrao sent the buyer's attorney a letter "purporting to terminate" the contract of sale and returning the deposit. More than seven months later, however, the buyer attempted to revive the contract of sale and purchase the property under its terms. The plaintiff refused, maintaining that the contract had been terminated. The buyer subsequently commenced an action against the plaintiff for specific performance of the contract of sale and filed a notice of pendency. In that action, the plaintiff argued, inter alia, that the contract of sale, had been terminated when the deposit was returned. The plaintiff also commenced a holdover proceeding. The plaintiff ultimately prevailed in the specific performance action.

The amended complaint asserted that the defendants committed malpractice by failing to "obtain a clear and unambiguous termination of the [contract of sale] after [the buyer's] attorneys advised Ingrao that she wished to terminate the [contract of sale]." The amended complaint listed various things that the plaintiff claimed the defendants "should have done" in order to accomplish [*2]a "clear and unambiguous" termination of the contract of sale. "

"The standard to which the defendant's conduct is to be compared is not that of the most highly skilled attorney, nor is it that of the average member of the legal profession, but that of an attorney who is competent and qualified (see Restatement [Second] of Torts: Negligence § 299A, Comment e). The conduct of legal matters routinely "involve[ ] questions of judgment and discretion as to which even the most distinguished members of the profession may differ" (Byrnes v Palmer, 18 App Div 1, 4, affd 160 NY 699). Absent an express agreement, an attorney is not a guarantor of a particular result (see Byrnes v Palmer, 18 App Div at 4; see also 1B NY PJI3d 2:152, at 140-141 [2012]), and may not be held "liable in negligence for . . . the exercise of appropriate judgment that leads to an unsuccessful result" (Rubinberg v Walker, 252 AD2d 466, 467; see Grago v Robertson, 49 AD2d 645, 646; see also PJI 2:152).

It follows that "[the] selection of one among several reasonable courses of action does not constitute malpractice" (Rosner v Paley, 65 NY2d 736, 738; see Dimond v Kazmierczuk & McGrath, 15 AD3d 526, 527). Attorneys are free to act in a manner that is "reasonable and consistent with the law as it existed at the time of representation," without exposing themselves to liability for malpractice (Darby & Darby v VSI Intl., 95 NY2d 308, 315; see Noone v Stieglitz, 59 AD3d 505, 507; Iocovello v Weingrad & Weingrad, 4 AD3d 208, 208). "

 

"In conclusion, as the plaintiff effectively concedes, he is estopped from denying that the defendants effected a legally valid termination of the contract of sale. To the extent that the allegations in the amended complaint are not barred by the doctrine of judicial estoppel, they fail to state a cause of action to recover damages for legal malpractice. Accordingly, the defendants' motion to dismiss the amended complaint was properly granted and the plaintiff's cross motion was properly denied as academic."

 

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Why Was This Case Brought?

We've read and re-read the decision in Risk Control Assoc. Ins. Group v Maloof, Lebowitz, Connahan & Oleske, P.C.   2014 NY Slip Op 00419   Decided on January 23, 2014  Appellate Division, First Department  and we still cannot see how plaintiff thought it could proceed.  It was not the insurance company which hired defense attorneys, nor a re-insurer who became liable after the underlying case ended; it was not even the defendant itself.  In this case the "claims administrator" for the insurer sued.  Why?
 

"Plaintiff, a claims administrator for an insurer, commenced this action alleging legal malpractice against defendants, who were retained to represent the insurer in a personal injury action. Acknowledging that it is not in privity with defendants, plaintiff contends that it may bring the cause of action by virtue of its relationship of near privity with them (see Federal Ins. Co. v North Am. Specialty Ins. Co., 47 AD3d 52, 59, 60-61 [1st Dept 2007]). However, plaintiff does not allege that it had a contractual obligation to pay for the loss in the personal injury action (compare Allianz Underwriters Ins. Co. v Landmark Ins. Co., 13 AD3d 172 [1st Dept 2004] [excess insurer alleged relationship of near privity with counsel hired by primary carrier to represent defendant in underlying action]). Nor does it allege that it sustained actual damages because of this obligation (see AmBase Corp. v Davis Polk & Wardwell, 8 NY3d 428, 434 [2007]). Similarly, plaintiff's factual allegations do not suffice to state an equitable subrogation cause of action against defendants (see Winkelmann v Excelsior Ins. Co., 85 NY2d 577, 581 [1995]). "

 

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Arrested, Convicted and Now Loses Legal Malpractice Case

Judge Lippman once wrote that allowing legal malpractice proceedings against the criminal defense attorney absent "actual innocence" would be very very bad.   "We see no compelling reason to depart from the established rule limiting recovery [*4]in legal malpractice actions to pecuniary damages. Allowing this type of recovery would have, at best, negative and, at worst, devastating consequences for the criminal justice system. Most significantly, such a ruling could have a chilling effect on the willingness of the already strapped defense bar to represent indigent accused. Further, it would put attorneys in the position of having an incentive not to participate in post-conviction efforts to overturn wrongful convictions. "

Here, in Herschman v Kern, Augustine, Conroy & Schoppman  2014 NY Slip Op 00416
Decided on January 23, 2014  Appellate Division, First Department we see one result.  Plaintiff was arrested and later convicted for medicare violations.  His claim against the attorney was that they negligently advised him such that he was arrested.  His claim fails.
 

In this legal malpractice action, plaintiff, a physician, alleges that defendants failed, inter alia, to represent him properly in connection with investigations by Medicare and the Office of Professional Conduct into the licensure of his employee, Jerrold Levoritz, and his billing practices, and that these failures resulted in his arrest for grand larceny and insurance fraud.

The documentary evidence submitted by defendants on their CPLR 3211 motion refutes plaintiff's allegations, by showing that any purported negligence on their part in connection with the administrative proceedings or any advice with respect to plaintiff's method of billing Medicare for Levoritz's services did not proximately cause plaintiff's arrest. The indictment for grand larceny in the second degree charged that plaintiff billed for services that were not rendered, and the record of his criminal conviction for grand larceny plainly contradicts the allegations in the complaint (see Bishop v Maurer, 33 AD3d 497 [1st Dept 2006], affd 9 NY3d 910 [2007]). Since plaintiff's own actions resulted in his arrest, he failed to show that any alleged malpractice on defendants' part proximately caused his damages, i.e., his arrest (see Minkow v Sanders, 82 AD3d 597 [1st Dept 2011]). This failure mandates the dismissal of his legal malpractice action regardless of whether defendants were negligent (Leder v Spiegel, 31 AD3d 266, 267-268 [1st Dept 2006], affd 9 NY3d 836 [2007], cert denied 552 US 1257 [2008]). "

 

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Judiciary Law 487 in the Major Leagues

Today'sNYLJ article by Andrew Keshner gives the background to a very high level spat between marquee named attorneys Ire Lee Sorkin, Judd Bernstein and Raoul Felder.  Was it deceit, or was it just good old bare-knuckled lawyering?

"In two separate rulings, one state and one federal judge declined to punish high-profile attorney Ira Lee Sorkin for his advocacy in a now-dismissed civil racketeering case.

Though Eastern District Judge Arthur Spatt disqualified Sorkin, of Lowenstein Sandler, and later tossed the suit, he stopped short on Jan. 10 of sanctioning Sorkin and plaintiff Annette Lorber, finding their decision to bring the case was not "wholly unreasonable."

A day earlier, Nassau County Supreme Court Justice Jerome Murphy dismissed a related action that alleged Sorkin told "outright lies" about how he came to possess a document subject to the work product privilege between an adversary and the adversary's attorney.

"Was Sorkin's defense of a claim that he had utilized a document shielded by the attorney work product deceit or collusion within the intent of [Judiciary Law] §487? The Court believes not," Murphy wrote in Winston v. Sorkin, 8227-13.

Both rulings mark the latest round for a legal brawl touched off by a July 2012 suit that Lorber brought against her estranged son-in-law, real estate developer Jonathan Winston and others. With the suit dismissed on procedural grounds, Winston countered with a challenge to Sorkin's conduct related to possession of the privileged document and his decision to file the suit for Lorber in the first place.


Winston filed an August 2012 motion saying Sorkin's previous representation of Winston disqualified him from representing Lorber. Two months later, he filed a motion to dismiss or at least disqualify Sorkin, saying the attorney came to possess a document he was not authorized to have.

The document was an incomplete memorandum from Winston's former attorneys to end his probation that was never submitted in the criminal case. Explanations of its contents are either redacted or go without elaboration in court papers.

The original complaint had a single reference to the memo, saying, it "contains false and misleading information, including much of the same false and misleading information alleged herein." The reference was omitted in the amended complaint.

Winston said, to the best of his recollection, he only shared the document with Eve, when their marriage was still strong.

At a conference in front of Spatt, Sorkin said the document "was given to a third party. That third party passed it on to another party and that party gave the document to me in the presence of the first third party."

In a subsequent affidavit, Sorkin said he got a copy of the document by email from the offices of Raoul Felder, who had previously represented Eve in the divorce. In his affidavit, Sorkin said neither Felder nor an associate told him the document was privileged, adding that Felder told him either Eve or her mother gave Felder the document.

Felder said in an affidavit he did not remember the circumstances surrounding receipt of the document, and Eve did not remember ever seeing the document.

In any event, in November 2012, Spatt, sitting in Central Islip, said Sorkin's previous representation made "trial taint" a "clear" possibility. The judge said Sorkin offered "varying accounts" of how he got the document, which was shielded by the work-product privilege. Spatt said use of the document was an "additional" ground to support Sorkin's disqualification (NYLJ, Nov. 27, 2012).

In July 2013, Spatt dismissed Lorber's civil racketeering claim as time barred and refused to rule on Lorber's remaining state law claims.

Within a month of dismissal, Winston asked Spatt to impose sanctions against Sorkin and Lorber for pressing a suit that, he said, was false and they knew, or should have known, was false.

Moreover, he sued Sorkin in Nassau County Supreme Court under Judiciary Law §487, arguing that Sorkin "engaged in deceit with intent to deceive the Court," when he explained how he obtained the draft (NYLJ, July 10, 2013). Sorkin countered he was not deceitful as a matter of law.

 

The Judiciary Law case is Winston v. Sorkin, Supreme Court, Nassau County.

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It's Just Too Late, Too Late for Legal Malpractice Case

Clients think about suing their attorney; they think long and hard.  Sometimes, they get distracted, and time passes.  Sometimes too much consideration leads to too much delay. As an example, in this case Plaintiff's mother brought a personal injury case against the City of New York for plaintiff from an injury of December 20, 2002. She retained defendant attorneys to represent her. She discharged the attorneys via a "Consent to Change Attorneys" in August , 2006. She brought the legal malpractice case Fleyshman v Suckle & Schlesinger, PLLC ; 2012 NY Slip Op 00176 ; Appellate Division, Second Department. This case was dismissed on the statute of limitations.

"The Supreme Court erred in denying that branch of the defendants' motion which was pursuant to CPLR 3211(a)(5) to dismiss the first cause of action, alleging legal malpractice, as time-barred. The defendants sustained their initial burden by demonstrating, prima facie, that the alleged legal malpractice occurred more than three years before this action was commenced in May 2010 (see CPLR 214[6]; Rupolo v Fish, 87 AD3d 684, 685; Krichmar v Scher, 82 AD3d 1164, 1165). In response, the plaintiff failed to raise a question of fact as to whether the statute of limitations was [*2]tolled by the doctrine of continuous representation. All of the documentary evidence demonstrated that the relationship necessary to invoke the continuous representation doctrine terminated in August 2006, and the plaintiff's submissions did not indicate that her trust and confidence in the defendants continued, or was restored, after that date (see Rupolo v Fish, 87 AD3d 684; Krichmar v Scher, 82 AD3d at 1165; Marro v Handwerker, Marchelos & Gayner, 1 AD3d 488; Piliero v Adler & Stavros, 282 AD2d 511, 512; Aaron v Roemer, Wallens & Mineaux, 272 AD2d 752, 754-755).

Moreover, the Supreme Court should have granted that branch of the defendants' motion which was pursuant to CPLR 3211(a)(7) to dismiss the second cause of action, which alleged a violation of Judiciary Law § 487. Even as amplified by the plaintiff's affidavit, and according the plaintiff the benefit of every favorable inference (see Leon v Martinez, 84 NY2d 83), the complaint failed to allege that the defendants acted "with intent to deceive the court or any party" (Judiciary Law § 487[1]; see Jaroslawicz v Cohen, 12 AD3d 160, 160-161). Further, the plaintiff's allegation that the defendants "willfully delayed [her] recovery with a view to their own ends and benefit" is a bare legal conclusion, "which is not entitled to the presumption of truth normally afforded to the allegations of a complaint" (Rozen v Russ & Russ, P.C., 76 AD3d 965, 969; see Judiciary Law § 487[2]). "
 

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Giving With One Hand, Taking With the Other

In the past several years we've been given unprecedented access to court records. No more is it necessary to travel to the courthouse to review a file, nor must we wait for the clerk to mail (or not mail) a decision. The Court's online presence has rapidly increased.   However, access to written decisions is not universal. in Bullfrog, LLC v Nolan ; 2013 NY Slip Op 00168; Appellate Division, Second Department  we are able to read the AD decision, but the Supreme Court decision is not on-line. While we can look and see the date it was decided, and the type of motion which was decided, no scan of the decision is available, so we cannot say what the Supreme Court judge saw that the Appellate Division differed with.

"An action to recover damages for legal malpractice must be commenced within three years after the accrual of the cause of action (see CPLR 214[6]). Here, the defendant Kevin Barry (hereinafter the appellant) sustained his initial burden on that branch of his motion which was to dismiss the cause of action to recover damages for legal malpractice by demonstrating that the applicable limitations period had expired with respect to the alleged acts of legal malpractice. Contrary to the Supreme Court's determination, the evidence submitted by the plaintiff in opposition was insufficient to raise a triable issue of fact as to whether the continuous representation doctrine tolled the running of the statute of limitations (see Hasty Hills Stables, Inc. v Dorfman, Lynch, Knoebel & Conway, LLP, 52 AD3d 566, 567-568; Melendez v Bernstein, 29 AD3d 872, 873; Dignelli v Berman, 293 AD2d 565, 566; Muller v Sturman, 79 AD2d 482, 486-487). Accordingly, the cause of action to recover damages for legal malpractice should have been dismissed as time-barred. [*2]

The appellant was also entitled to summary judgment dismissing the plaintiff's cause of action for replevin insofar as asserted against him. The appellant established, prima facie, that he did not unreasonably refuse to return the documents requested by the plaintiff (see Khoury v Khoury, 78 AD3d 903, 904; Wiel v Curtis, Mallet-Prevost, Colt & Mosle, 66 Misc 2d 466, 469, affd 36 AD2d 1027, affd 30 NY2d 500). In opposition to the motion, the plaintiff failed to raise a triable issue of fact. The Supreme Court, therefore, should have granted that branch of the appellant's motion which was for summary judgment dismissing the cause of action for replevin insofar as asserted against him. "
 

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Looking at Medical Malpractice; Looking at Legal Malpractice

Our meme is that legal malpractice is ubiquitous and may arise in almost any setting. Here, in a medical malpractice case we see what could have been a nasty legal malpractice had the AD no intervened. In Westchester, cases go the the Trial Assignment Part which has broad discretion in the scheduling of trials. There is great tension in the scheduling of trials. On the one hand, attorneys need to fully book their time in order to make a living. On the other hand, there are at least two and often more law firms all booking cases (plaintiff and defense) and trying to make a living. In order to try a case, one needs witnesses, and experts each have their own schedules, with vacations and professional responsibilities and other trials. Its a challenge to get a case tried. Cases get dismissed when the process gets too hard, and parties are injured. Legal mal often follows.

In Vera v Soohoo 2012 NY Slip Op 07104 ; Appellate Division, Second Department we see how one effort came apart.


"On January 4, 2010, David Pierguidi of The Pagan Law Firm, P.C., appeared on behalf of the plaintiff, and notified the Supreme Court that the plaintiff's expert, who was of paramount importance to the plaintiff's case, was unavailable to testify. Counsel provided the Supreme Court with an affidavit from the expert, in which he stated that he would be away on vacation from January 5 through January 13, and that the vacation could not be canceled. Counsel informed the Supreme Court that the parties had conferred and would all be available to try the case in the middle of February. The Supreme Court, after noting that the case was eight years old, offered to adjourn the matter until January 14. Counsel for Malhotra inquired as to how long the plaintiff's case would last, noting that he had a case on January 25, in Rockland County, and a case in federal court scheduled for February 1. The plaintiff's counsel responded that his case alone would take three days to try, and alerted the court that his firm had a conflict with another case that was being tried in Kings County. In response, the Supreme Court directed the law clerk to read the procedural history of the case into the record. While she was still doing so, the Supreme Court cut her off, stating, "that's enough." Then, without further comment or questions about plaintiff's counsel's claimed scheduling conflict, the Supreme Court, sua sponte, dismissed the action pursuant to 22 NYCRR 202.27, stating "this is a fault [sic] dismissal." The court subsequently issued a written order indicating that the action was being dismissed for counsel's failure to proceed to trial on January 4, 2010.

The plaintiff timely moved to vacate the order and restore the action to the action to the trial calendar. In the moving papers, the plaintiff's counsel affirmed that the trial date offered by the Supreme Court, January 14, 2010, conflicted with a case entitled Bryan v Hurwitz that his firm was scheduled to try on January 19, 2010, and that Bryan v Hurwitz had a 1999 index number. In an order dated June 4, 2010, the Supreme Court denied the plaintiff's motion, finding that, while she had a potentially meritorious cause of action, she had failed to provide a reasonable excuse for her inability to proceed on January 4, 2010, or January 14, 2010.

Under 22 NYCRR 202.27, a court may dismiss an action when a plaintiff is unprepared to proceed to trial at the call of the calendar (see Fink v Antell, 19 AD3d 215; Johnson v Brooklyn Hosp. Ctr., 295 AD2d 567, 569; Farley v Danaher Corp., 295 AD2d 559, 560). In order to be relieved of that default, a plaintiff must demonstrate both a reasonable excuse for the default and a potentially meritorious cause of action (see e.g. Felsen v Stop & Shop Supermarket Co., LLC, 83 AD3d 656).

Here, the plaintiff's proffered reason for being unable to proceed on January 4, 2010, was that her expert was unavailable to testify because of a scheduled vacation between January 5 and January 13, 2010, which the expert could not cancel. That excuse was a reasonable one (see Vorontsova v Priolo, 61 AD3d 556, 556-557; Conde v Williams, 6 AD3d 569, 570; Goichberg v Sotudeh, 187 AD2d 700, 701; cf. Kandel v Hoffman, 309 AD2d 904; Spodek v Lasser Stables, 89 AD2d 892). Indeed, the Supreme Court accepted that excuse, as evidenced by its offer during the colloquy on January 4 to adjourn the trial to January 14. In addition, in its order denying the plaintiff's motion to vacate the default, the Supreme Court stated that it had been willing to adjourn the trial to accommodate the expert's vacation, tacitly acknowledging that it had concluded that the excuse was reasonable. Nevertheless, it held in that order that the plaintiff's action should be dismissed, in part, because the record was silent as to when the plaintiff's counsel informed his expert of the trial date, when the expert scheduled his vacation, and when counsel learned of the expert's vacation schedule. However, that claimed justification for dismissing the plaintiff's action, which is adopted by the dissent, is not supported by the record since the Supreme Court never mentioned any of those enumerated deficiencies during the colloquy on January 4, 2010.
Even accepting the post hoc conclusion that the action was validly dismissed for the failure to proceed on January 14, a reasonable excuse for that failure was provided. The plaintiff's counsel explained that his firm had another trial involving a medical malpractice claim scheduled in Kings County for January 19, 2010, that the case had been marked as final, and that it was older than this case. The plaintiff's counsel noted that, in the instant action, the presentation of his case alone would take three days, and, thus, depending on the length of the case presented by the Hospital and Malhotra, there was the potential for a conflict between the Kings County case and this case. Thus, it is evident from the record that counsel was trying to avoid the "overbooking of cases" (Pichardo-Garcia v Josephine's Spa Corp., 91 AD3d 413, 414 [internal quotation marks omitted]; see Perez v New York City Hous. Auth., 47 AD3d 505, 505). While we agree with the dissent that there was no actual conflict on January 14, the point is that there was the potential for conflict on January 19 when the two trials might overlap, and the plaintiff's counsel was attempting to avoid creating a conflict for his firm. Moreover, contrary to our dissenting colleague's assertion, counsel indicated that The Pagan Law Firm, P.C., consisted of only three lawyers, and that William Pagan was the only attorney from the firm qualified to try medical malpractice cases. The dissent characterizes this contention as "unsubstantiated and self-serving after-the-fact," since it was not made until counsel for the plaintiff submitted reply papers on the motion to vacate. However, this contention was made in response to arguments advanced by the Hospital and Malhotra, which is the proper function of reply papers (see Matter of Harleysville Ins. Co. v Rosario, 17 AD3d 677, 677-678; Lebar Constr. Corp. v HRH Constr. Corp., 292 AD2d 506, 507). Therefore, under the circumstances of this case, we conclude that the plaintiff provided a reasonable excuse for the inability to proceed on January 4, 2010, and January 14, 2010 (see Mayo v New York Tel. Co., 175 AD2d 390, 391; see also Krivda v Liberty Lines Express, Inc., 27 AD3d 260, 261; cf. McKenna v Connors, 36 AD3d 1062, 1063)."
 

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Discovery Disregarded, Cases Lost, Legal Malpractice Case Started

QBE Ins. Corp. v Lebowitz  2013 NY Slip Op 31752(U)  July 11, 2013  Supreme Court, New York County   Docket Number: 600412/10 Judge: Milton A. Tingling leads one to the question, How could this happen?  Law firm defends insurance company, and routine discovery demands are served.  Routine discovery demands are ignored.  Not until after the date for responses does the law firm even ask its client for the materials.  Numerous adjourned dates go by and the material is not provided.  Summary judgment ensues.  Appeal is taken. Appeal is lost. 

Insurance company sues its attorney, and the attorney brings in the claims service which was taking care of the insurance company's files and documents.  Claims service company tries to get out of the case.  Here, from the decision:

"All of the files handled by CSB for QBE were transferred to Rockville Risk Management Associates in early November 2006. These included the files for the AWL Industries action. Another status Conference in the AWL Industries action was held on November 8, 2006 and the court extended QBE’s time to comply with the court’s October 16,2006 order to December 8, 2006 (id. at 18-1 9). On December 19,2006 another compliance conference was held where the court entered a status order stating that the note of issue was ready to be filed. Plaintiffs in the A WL Industries action filed note of issue on or about December 2 1, 2006. On February 20, 2007, the plaintiffs in the underlying AWL Industries action filed a motion for summary  judgment and to strike QBE’s answer for failure to provide discovery (id. at 77 20-21). On February 2 1, 2007, Rockville informed Maloof Lebowitz that Newman Myers would substitute in as counsel for QBE. Ultimately, Judge Tingling issued and order on October 17,2007 that granted summary judgment to AWL Industries (id. at 77 21-22). On March 24, 2008, on behalf of QBE, Newman Myers served a motion for leave to renew the motion or summary judgment. On December 22,2008, the court issued an order denying the motion to renew. An appeal of these orders was taken and an appellate brief was filed on February 5,2009. On September 15, 2009, the Appellate Division, First Department affirmed the trial court’s orders granting summary judgment (id. at 18 23-25). QBE claims that as a result of the First Department’s decision it was forced to settle the coverage action an tender the full amount of the policy, $1 million, as well as AWL Plaintiffs legal fees and costs. In addition, QBE alleges that Maloof Lebowitz engaged in legal malpractice in its representation of QBE in the AWL Industries action because their answer was stricken as a result of Maloof Lebowitz’s repeated failure to timely comply with discovery 

Once the movant has established a prima facie case that it is entitled to summary judgment, the burden then shifts to the party opposing the motion to tender sufficient evidence in admissible form to defeat the motion Zuckerman v. City of New York, 49 N.Y.2d 557 (1980). The third party plaintiffs opposition raises triable issues of fact in dispute concerning what caused the legal malpractice in the underlying action. Here, Maloof Lebowitz claims that CSB failed to provide them with a written statement from an employee, Frank Allecia in the underlying AWL Industries action, which they received in March of 2006. Maloof Lebowitz relied on CSB to relay its claims administrations and investigation to them on numerous occasions to no avail. In addition, CSB failed to provide Maloof with discovery assistance before the final discovery deadline became effective and before they were relieved of their third party administrator duties. Accordingly summary judgment does not lie. Therefore the third party defendant's motion for summary judgment is denied."
 

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Neglect in the Hospital, Neglect in the Courtroom

Bedsores are a cardinal mark of neglect in hospital care.  They need never occur, and once they are created, should/could/must be treated so that they go away.  The decedent in this legal malpractice case was treated horribly.  The survivors then hired an attorney who let the case go, and himself was disbarred upon a guilty plea to a felony.  Result?  Not good.

In Corsiatto v Maddalone  2013 NY Slip Op 30553(U)  March 13, 2013  Supreme Court, Suffolk County  Docket Number: 2009-14305  Judge: John J.J. Jones Jr   we see:"’I‘he legal malpractice action was commenced on April 14, 2009. The underlying claim was for medical malpractice, neglect and mistreatment of Veronica Pecoraro, the plaintiffs mother, [“the decedent”], while the decedent was a patient at United Presbyterian Residence [“UPR’]. The decedent was admitted to UPR in August of 1994. She presented with a history of having suffered a stroke and congestive heart failure, was oxygen dependent and diabetic. Upon admission to UPR she had a Stage 1-11 pressure ulcer in the sacral area in the beginning stages, also referred to as a bedsore or decubitus ulcer."

"This action for legal malpractice was commenced on April 14,2009. On this inquest the plaintiff” seeks $1,000,000 in compensatory damages, $1,000,000 in punitive damages, and interest on the award from the date of the legal malpractice. In support of the application the. plaintiff submitted, inter alia, the affidavit of Paul Knieste, R.N., dated October 16,20 12 [“the Knieste affidavit”] to express an expert opinion based on the decedent’s medical records regarding her care and management while at UPR. The Knieste affidavit does not include Knies te’s educational background or a description of credentials qualifying Knieste as an expert on wound care."
 

"This action for legal malpractice was commenced on April 14,2009. On this inquest the plaintiff” seeks $1,000,000 in compensatory damages, $1,000,000 in punitive damages, and interest on the award from the date of the legal malpractice. In support of the application the. plaintiff submitted, inter alia, the affidavit of Paul Knieste, R.N., dated October 16,20 12 [“the Knieste affidavit”] to express an expert opinion based on the decedent’s medical records regarding her care and management while at UPR. The Knieste affidavit does not include Knies te’s educational background or a description of credentials qualifying Knieste as an expert on wound care."

"Informed by the foregoing, and in light of the evidence adduced by the plaintiff‘ demonstrating a violation of the Public Health Law in the management of the decedent’s Stage IV bedsore for a period of one month, the court believes that $200,000 does not materially deviate from what could be considered reasonable compensation given that the decedent’s medial condition made her a high risk for decubitus ulcers, that on admission to UPR she presented with a Stage 1-11 pressure sore, and that the proof pointed out UPR’s failures to properly manage the bedsore that occurred in the approximately four weeks that preceded her death."

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Some Important Baseline Determinations in a Legal Malpractice Case

Attorney sues Client for legal fees.  Opening a legal malpractice blog with that sentence is akin to starting a novel with "it was a dark and stormy night..."  So much of legal malpractice litigation arises after a fee dispute that "Fee dispute-legal malpractice" is a google search term.  Here, in Brill & Meisel v Brown  2014 NY Slip Op 00180  Decided on January 14, 2014  Appellate Division, First Department  the Appellate Division states some bedrock rules. 
 

1.  Whether the time to file a summary judgment motion has passed, a cross-motion for summary judgment which seeks dismissal of the same claims is properly considered. 

2.  It is error to refer a summary judgment case to a referee to determine factual matters, when the MSJ itself debates whether there are questions of fact to be determined.

3.  Timely objection to a bill will defeat an account stated defense, but general objections may not be sufficient.

4. Misconduct that occurs before an attorney's discharge but discovered after the discharge may serve for fee forfeiture. 

"The motion court correctly found that issues of fact exist as to whether defendants sustained damages in connection with their malpractice counterclaim and whether plaintiff proximately caused those damages. In particular, the motion court correctly held that issues of fact exist as to whether defendants incurred unnecessary, as yet unreimbursed, attorneys' fees when plaintiff continued to pursue allegedly futile contempt proceedings in a Housing Court action even after Housing Court made clear it could not afford defendants any relief. Further, plaintiff failed to eliminate any triable issues of fact as to whether its conduct in signing a confidentiality agreement was the proximate cause of defendants' damages, as defendants allegedly incurred additional fees in procuring another inspection and report not covered by the agreement, and in attempting to overturn the agreement.

The motion court correctly ruled that any damages stemming from disclosure of defendant Altman's litigation outline are too speculative to support defendants' malpractice counterclaim (see Russo v Feder, Kaszovitz, Isaacson, Weber, Skala & Bass, 301 AD2d 63, 67 [1st Dept 2002]). Among other things, it is too speculative to conclude that cross-examination at Altman's deposition would have been shorter, and thus legal fees lower, but for disclosure of the outlines.

The motion court, however, erred in denying defendants' cross motion to strike plaintiff's references to a "Damages Analysis" as proof of the value of defendants' damages. The document was created for settlement purposes in a Supreme Court action against the cooperative corporation of defendants' building. Such documents "are inadmissible to prove either liability or the value of the claims" (CIGNA Corp. v Lincoln Natl. Corp., 6 AD3d 298, 299 [1st Dept 2004]; see also CPLR 4547).

As issues of fact remain regarding whether defendant was discharged for cause, summary judgment is not warranted on plaintiff's account stated claim (see EMC Iron Works v Regal Constr. Corp., 7 AD3d 366, 367 [1st Dept 2004]). Defendants' timely written objections to plaintiff's final invoice, dated July 2, 2008, for work performed in the Supreme Court action also creates triable issues of fact as to plaintiff's account stated claim (id.). Defendants' general objections, however, to plaintiff's bills do not suffice to challenge the remainder of the amount owed (see Schulte Roth & Zabel, LLP v Kassover, 80 AD3d 500, 501 [1st Dept 2011], lv denied 17 NY3d 702 [2011]).
Given the numerous triable issues of fact regarding plaintiff's representation, triable [*3]issues of fact exist regarding plaintiff's performance of the retainer agreement. Accordingly, summary judgment is not warranted on plaintiff's breach of contract claim (see Kluczka v Lecci, 63 AD3d 796, 798 [2d Dept 2009]). "

 

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A Matrimonial Representation Gone Bad

Matrimonial legal malpractice has two distinct sides.  In representing the monied spouse, it generally consists of a claim that the attorney overbilled, and churned the file.  In representing the non-monied spouse, it generally consists of a claim that the settlement was unfair, or that the attorney failed to discover a large cache of assets.

In Mayerson Stutman Abramowitz, LLP v Rosenbaum  2014 NY Slip Op 30016(U)  January 6, 2014  Supreme Court, New York County  Docket Number: 152172/2013  Judge: Eileen A. Rakower we see a more common or varietal species of fee dispute/counterclaim situation.  Here, defendant-spouse has already tried and lost a legal malpractice case, and is now defending against an account stated claim.

"This action was commenced on March 8, 2013 by plaintiff Mayerson Stutman Abramowitz, LLP ("Plaintiff') with the filing of a Summons and Verified Complaint on March 8, 2013. The Complaint alleges claims for account stated and breach of contract against defendant Carolyn Donovan Rosenbaum ("Defendant" or "Rosenbaum").


On March 27, 2013, Defendant interposed an answer with affirmative defenses and counterclaims. The affirmative defenses asserted are: statute of limitations has expired, the services rendered by Plaintiff were "unnecessary, unwarranted, and duplicative," and the services rendered were "inadequate and improperly performed." Defendant's first counterclaim is for breach of contract
by Plaintiff in "charging Defendant unnecessary, wasteful and duplicative legal charges and expenses in the amount of $159,536 and seeks the refund of all sums paid to Plaintiff; the second is for unjust enrichment; and the third is for misrepresentation of sums allegedly due and owing and violation of the New York Code of Professional Responsibility.

Here, Plaintiff has made a prima facie showing of entitlement to judgment as a matter of law on its account stated claim by submitting evidence of Defendant's receipt and retention of Plaintiffs invoices without objection within a reasonable time, and partial payments made thereon. Defendant, in opposition, has failed to raise a triable issue of fact by failing to submit evidence in admissible form that Defendant made any objection upon receipt of the Plaintiffs invoices or
within a reasonable time thereafter. The discovery defendant claims is outstanding, specifically, the deposition of Abramowitz, would not be the source of such evidence. Furthermore, as for Defendant Rosenbaum' s Counterclaims, Defendant Rosenbaum previously commenced an action on March I 0, 20 I 0 entitled "Carolyn Donovan Rosenbaum v. Sheresky Aronson Mayefsky & Sloan, LLP, Heidi E. Harris, Esq., Allan Mayesky, Esq., Mayerson Stutman Abramowitz, LLP, and
Alton L. Abramowitz, Esq.," Index No. 7341-2010, which asserted claims for legal malpractice arising from the Mayerson law firm's negotiation of her Separation Agreement, breach of contract based on allegations of overcharging of Plaintiff by the Mayerson law firm, and unjust enrichment. On August 17, 20 I 0, Justice Mary H. Smith dismissed the legal malpractice claim on the basis that the Mayerson law firm demonstrated that the parties' legal relationship had ceased nineteen months before the purported Settlement Agreement had been reached. The Court further dismissed Rosenbaum's breach of contract claim as duplicative of her legal malpractice and excessive fee claims and Rosenbaum's unjust enrichment claim in light of the existence of a written retainer agreement. The Court permitted Rosenbaum to re-file her fee dispute claim with the Joint Committee on Fee Dispute and Conciliation. On March 3, 2011, Defendant filed an appeal with the Appellate Division, Second Department, asserting that the lower court erred in dismissing the action against the Mayerson law firm. On November 14, 2012, the Second Department affirmed the decision of the trial court. On November 28,2012, the Mayerson law firm attempted to restore the Fee Arbitration but was unable to do so and commenced the instant action. "

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Harsh Words Do Not Sever the Attorney-Client Relationship

The beginning and end of an attorney-client relationship have some formal aspects to them.  They are guided and controlled by CPLR 321.  The end of the attorney-client relationship has a direct link to the question of commencement of the statute of limitations.  Defendant attorneys in legal malpractice cases often point to harsh communications which precede the actual end of the attorney-client relationship, and argue that it ended well before a consent to change attorney was filed.

Here, in  Louzoun v Kroll Moss & Kroll, LLP   2014 NY Slip Op 00096   Decided on January 8, 2014  Appellate Division, Second Department   we see how this argument fares.  "In support of their motion, the defendants proffered an email message from the plaintiff dated August 7, 2008, in which the plaintiff expressed dissatisfaction with KMK, accused KMK of having committed malpractice, disputed fees, and demanded her legal file. The defendants argued that the August 7, 2008, email message ended the trust and confidence required of a continuing attorney-client relationship, rendering the action commenced on August 9, 2011, untimely. In opposition, the plaintiff argued that her action was timely commenced, as the defendants' representation of her continued until August 19, 2008, the date on which she executed a formal Consent to Change Attorney. The Supreme Court denied the defendants' motion.

To dismiss a complaint pursuant to CPLR 3211(a)(5) as barred by the applicable statute of limitations, the defendant bears the burden of establishing, prima facie, that the time in which to sue had expired prior to the commencement of the action (see Singh v Edelstein, 103 AD3d 873; DeStaso v Condon Resnick, LLP, 90 AD3d 809, 812). The statute of limitations for legal malpractice is three years measured from the date of the alleged malpractice (see CPLR 214[6]; [*2]McCoy v Feinman, 99 NY2d 295, 301; Shumsky v Eisenstein, 96 NY2d 164, 166; Singh v Edelstein, 103 AD3d at 873), but may be tolled by operation of the continuous representation doctrine (see Zorn v Gilbert, 8 NY3d 933, 934; Shumsky v Eisenstein, 96 NY2d at 167). Documentary evidence may entitle a defendant to the dismissal of a complaint pursuant to CPLR 3211 (a)(1), but only where such evidence "conclusively establishes a defense to the asserted claims as a matter of law" (Leon v Martinez, 84 NY2d 83, 88).

Here, the plaintiff's email message dated August 7, 2008, does not conclusively contradict the allegation, set forth in paragraph 103 of her complaint, that the defendants were not discharged as her counsel until August 19, 2008. The email message makes demands and accusations but does not necessarily or unequivocally terminate the parties' attorney-client relationship. The email message states, inter alia, that, "without the judgment being signed, I have no money with which to pay," which suggests the need for further legal work to be performed, and also states that since the plaintiff and counsel both attend the same synagogue, "it will be a pity to have bad blood between us." In light of those statements, and the Consent to Change Attorney that was not executed until August 19, 2008, the defendants failed to conclusively establish that the attorney-client relationship did not continue until the latter date. Accordingly, the defendants' motion to dismiss the complaint was properly denied. "


 

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Whistleblower Loses Legal Malpractice Claim over Public Identification

We are not sure where the line between privacy and whistleblowing exists, nor where the balance should be.  Galloway v Wittels  2014 NY Slip Op 30006(U)  January 6, 2014 Supreme Court, New York County  Docket Number: 151287/2013  Judge: Cynthia S. Kern is an interesting example of how a person can become enmeshed in a situation much larger than himself, and be buffeted by the resulting storm.

"The relevant facts are as follows. This action centers around the fact that plaintiff, in 2009, was publicly identified as a whistleblower in a patent lawsuit between Convolve, Inc. ("Convolve") and Seagate Technology, LLC ("Seagate"). Specifically, in 2003, plaintiff was employed as an engineer at Seagate Technology, LLC ("Seagate"). At that time, plaintiff testified as a 30 (b)(6) witness for Seagate in a pending patent lawsuit commenced by Convolve against Seagate (the "CS Lawsuit"). Six years later, after being terminated by Seagate, plaintiff was contacted by Seagate's attorney and was advised that the CS Lawsuit was likely going to trial in January 2010 and that he might be called as a trial witness on Seagate's behalf. According to plaintiffs complaint, "[p]rompted by the call from Seagate's attorney, [he] did some research on the ongoing lawsuit and learned that, in addition to the patent litigation, Convolve had sued Seagate for violation of a non-disclosure agreement (NOA)." Thereafter, "[a]fter reviewing the case, [plaintiff] came to the conclusion that Seagate·:had violated the NOA." (Emphasis in original). Apparently, disturbed by the realization that the work he had done at Seagate had violated the NOA, plaintiff sent an email to Convolve asking that its legal department contact him.

Plaintiff alleges that in response to this email, he was contacted by one or more attorneys from defendant Cadwalader Wickersham & Taftt, LLP ("Cadwalader"), who represented Convolve in the CS Litigation. Specifically, plaintiff alleges that defendant Debra Brown Steinberg ("Steinberg") was on the initial call with him. During the call, Cadwalder's attorneys ' allegedly asked if plaintiff was represented by counsel and after he told them he might still be represented by Seagate's attorney, the call ended. Thereafter, plaintiff alleges that he was contacted by Neil Singer, CEO of Convolve who recommended that plaintiff contact Wittels, an attorney formerly employed by Sanford Heisler's predecessor firm, Sanford Wittels & Heisler, LLP, at the time of the acts complained of herein, regarding plaintiffs termination of his employment from Seagate."

"Plaintiff now brings the instant action alleging that as a direct result of the defendants' misconduct in regards to allowing him to be publicly identified as a whistleblower he has been unable to find suitable employment in his field. Specifically, in his amended complaint, plaintiff asserts two causes of action against Wittels and Sanford Heisler, as successor in interest to Wittels former employer at the time the acts complained of herein occurred, for malpractice and breach of fiduciary duty. Wittels and Sanford Heisler now move for an order dismissing the two claims."

"In the present case, plaintiffs claim for malpractice must be dismissed as against the moving defendants as the allegations in the amended complaint, taken as true and given the benefit of every possible inference, fail to demonstrate that but for Wittels' alleged negligence plaintiff would not have been publicly named as a whistleblower and he would have found suitable employment. Moreover, plaintiff fails to plead actual and ascertainable damages that resulted from Wittels' alleged negligence."

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A Real Estate Transaction Gone Bad...Was it Legal Malpractice?

We have noted over the years that trial courts are all too eager to dismiss legal malpractice claims.  We argue that trial courts delve way to far into the underlying transaction (or litiigation)  in order to determine at the pre-answer stage, whether there is a "but for" component. 

The same issue is present in Endless Ocean, LLC v Twomey, Latham, Shea, Kelley, Dubin & Quartararo   2014 NY Slip Op 00087  Decided on January 8, 2014  Appellate Division, Second Department. 

"The plaintiff commenced this action to recover damages allegedly sustained as a result of the defendants' legal malpractice. As alleged in the complaint, the plaintiff retained the defendants to represent it in connection with the sale of certain real property and a related exchange of "like-kind property" pursuant to the Internal Revenue Code (see 26 USC § 1031). According to the allegations in the complaint, the plaintiff, based upon the defendants' advice, selected LandAmerica 1031 Exchange Services, Inc. (hereinafter LandAmerica), as the qualified intermediary to hold a portion of the sale proceeds, totaling $5.5 million, for the exchange of like-kind property pursuant to 26 USC § 1031. The complaint alleged, inter alia, that the defendants negligently represented the plaintiff inasmuch as they reviewed, and advised the plaintiff to execute, an agreement with LandAmerica, under which the exchange funds were to be held in a commingled [*2]account and not a qualified escrow account or trust. Soon after the sale proceeds were transferred to LandAmerica, its parent corporation, LandAmerica Financial Group, Inc., declared bankruptcy. According to the complaint, the plaintiff's funds were frozen for several years during the bankruptcy proceedings, and the plaintiff lost a portion of the funds because they were not held in a qualified escrow account or trust. The complaint further alleged that the plaintiff could not defer the taxes on the capital gains from the initial sale, as it did not have access to its funds to purchase a replacement property within the required 180-day period. "

"The Supreme Court improperly granted the defendants' motion to dismiss the complaint based on documentary evidence. A motion to dismiss a complaint pursuant to CPLR 3211(a)(1) may be granted only if the documentary evidence submitted by the moving party utterly refutes the factual allegations of the complaint, "conclusively establishing a defense as a matter of law" (Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d 314, 326). Here, the retainer agreement submitted by the defendants did not conclusively establish a defense as a matter of law (see Harris v Barbera, 96 AD3d 904, 905-906; Rietschel v Maimonides Med. Ctr., 83 AD3d 810, 811; Shaya B. Pac., LLC v Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, 38 AD3d 34, 38-39). "

"Here, construing the complaint liberally, accepting the facts alleged in the complaint as true, and according the plaintiff the benefit of every possible inference, as we are required to do, the plaintiff stated a cause of action to recover damages for legal malpractice (see Palmieri v Biggiani, 108 AD3d 604, 608; Kempf v Magida, 37 AD3d 763, 764). The plaintiff alleged in the complaint that the defendants were negligent in failing, inter alia, to advise it to keep its exchange funds in a qualified escrow account or trust, and that this negligence was a proximate cause of its damages. The defendants' contentions that it was the conduct of the plaintiff's manager and unforeseeable events that were the proximate causes of the plaintiff's damages, and that the defendants did not depart from the standard of care, concern disputed factual issues that are not properly raised and resolved on a motion to dismiss a complaint pursuant to CPLR 3211(a)(7).

The documents submitted by the defendants on appeal, which were annexed to their brief, are not properly before this Court, as they were not submitted to the Supreme Court (see CPLR 5526; Constantine v Premier Cab Corp., 295 AD2d 303, 304). Moreover, the defendants' arguments that relied upon these documents were improperly raised for the first time on appeal (see Salierno v City of Mount Vernon, 107 AD3d 971, 972). "

 

 

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Other Appellate Legal Malpractice Issues

Continuing from yesterday's blog post, we look at another appellate legal malpractice case.  In Aramarine Brokerage, Inc. v Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C. 2012 NY Slip Op 03533  Appellate Division, First Department the question of whether appellate counsel's failure to argue that District Court allowed an impermissible argument raised only in reply is now the basis of a legal malpractice claim against the attorney who did not make the argument.
 

"Plaintiff, an insurance broker, seeks to recover for legal malpractice arising out of defendant law firms' successive representation of it in connection with an underlying federal action against a group of insurers (the CGU insurers). In the federal action, the CGU insurers moved for, inter alia, summary judgment on their counterclaims for a return of insurance brokerage commissions paid in connection with premiums subsequently returned, on the ground that plaintiff's claim of an oral agreement between the parties was controlled by New York law and was unenforceable pursuant to the statute of frauds. The CGU insurers argued for the first time in reply that the oral agreement also failed for lack of consideration. Plaintiff, then represented by Hall Estill, neither objected to the CGU insurers' raising this issue in reply nor sought to submit a sur-reply. The district court (Casey, J.) granted the CGU insurers' motion, finding that the oral modification was subject to New York law and was unenforceable under New York's statute of frauds. The court found, alternatively, that plaintiff "failed to establish that any consideration was given in exchange for the alleged agreement" (American Hotel Intl. Group Inc. v CGU Ins. Co., 2004 WL 626187 *7 n 7, 2004 US Dist LEXIS 5154, *25 n 7 [SD NY 2004], vacated in part 307 Fed Appx 562 [2d Cir 2009]). On appeal by EB & G, the Second Circuit vacated the finding that New York law and the statute of frauds applied to the oral modification. Neither EB & G's appellate brief nor the Second Circuit's decision addressed the district court's alternative holding of "no consideration." [*2]"

"On remand, the district court (McMahon, J.) held that, although Judge Casey could have disregarded the argument first raised in reply, his "no consideration" ruling was "law of the case," because it had not been reversed on appeal (American Hotel Intl. Group Inc. v OneBeacon Ins. Co., 611 F Supp 2d 373, 379 [SD NY 2009], affd 374 Fed Appx 71 [2d Cir 2010]). Judge McMahon noted that plaintiff had not, inter alia, objected to Judge Casey's consideration of this argument on reply, or sought leave to file a sur-reply, or raised the issue on the prior appeal and reconsideration motions (id. at 376). She observed that, while the Second Circuit could have responded favorably to an abuse of discretion argument, it was "equally likely" to have "viewed with disfavor" plaintiff's failure to raise the issue before the district court, and concluded that, "[h]aving passed up every conceivable opportunity to raise this issue . . . [plaintiff] has waived any right to argue . . . that Judge Casey erred by considering the belatedly-raised no consideration' argument" (id. at 376, 377). "

"The complaint alleges that EB & G's failure to address the "no consideration" ruling in its appellate brief in the first federal appeal resulted in plaintiff's inability to defend against the CGU insurers' counterclaims. By thus alleging "facts from which it could reasonably be inferred that defendant's negligence caused [plaintiff's] loss," the complaint states a cause of action for malpractice (see Garnett v Fox, Horan & Camerini, LLP, 82 AD3d 435 [2011], citing InKine Pharm. Co. v Coleman, 305 AD2d 151 [2003]). In opposition to EB & G's motion, plaintiff was not required to show a "likelihood of success" (id. at 436). "
 

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Potential Legal Malpractice in Appeals

We have mused that legal malpractice litigation is often created by financial pressures.  Either the attorney has too many cases, or the law firm is understaffed, or the client is unwilling to pay/was overbilled. or, as discussed by Thomas Newman and Steven Ahmuty in today's New York Law Journal, the attorney is aware of the "high cost of reproducing a full record on appeal." 

The potential for legal malpractice exists here when the appellate attorney risks dismissal of the appeal because of financial constraints.  A full record, including a lot of material that no one is interested in, nor relies upon, can be shockingly expensive.  In order to save printing costs (often exorbitant), an appendix is used, with the unnecessary material carved out.

From the article: 'A concern over the high cost of reproducing a full record on appeal led to the adoption of the "appendix method" as an alternate means of prosecuting an appeal. Use of the appendix method is governed by CPLR 5528 "Content of briefs and appendices," and 5529 "Form of briefs and appendices," as supplemented by the individual rules of the Court of Appeals and each of the four departments of the Appellate Division.1 There are no uniform rules governing appendices so it is always necessary to check the rules of the court to which the appeal is being taken.

CPLR 5528(a)(5) permits the appellant to file "an appendix…containing only such parts of the record on appeal as are necessary to consider the questions involved." If the parties agree, a joint appendix bound separately may be used and filed with the appellant's brief.2 Two important points must be kept in mind: First, use of the appendix method does not eliminate the requirement of settlement of the entire trial transcript, absent a stipulation to the contrary. "It is primarily because a complete typewritten transcript settled by the trial court is available, that an appellant is authorized, without further settlement or court approval," to employ the appendix method.3 In the absence of the parties' consent, the court does not have the power under CPLR 5525 to settle any transcript which fails to include the entire transcript of the stenographic minutes of the trial.4

Second, the appellant must also include "those parts [of the record] the appellant reasonably assumes will be relied upon by the respondent." The court rules reinforce this latter requirement. Under the First Department's Rule 600.10(c)(2)(ii), an appendix must include "[r]elevant excerpts from transcripts of testimony or papers in connection with a motion. These must contain all the testimony or averments upon which appellant has reason to believe respondent will rely. Such excerpts must not be misleading because of incompleteness or lack of surrounding context." Each of the other departments has a similar rule.

What should be included in the appendix is not a matter of guesswork. Before preparing the appendix, the appellant's counsel should consult with the respondent's counsel to determine which parts of the record will be relied upon by the respondent. If counsel are unable to reach agreement as to the contents of the appendix, the respondent may file a supplemental appendix or, if the omissions from the appellant's appendix are substantial and material, the respondent may move to dismiss the appeal or compel the appellant to file a proper appendix."

 

 

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Attorneys Are Always Fiduciaries; Accountants Not So Much

Attorneys are subject to a triumvirate of claims, which may generally be: legal malpractice in tort, legal malpractice in contract and breach of fiduciary duty. Attorneys are fiduciaries of their clients, but interestingly, accountants (even CPAs) are not. In Knockout Vending Worldwide, LLC v Grodsky Caporrino & Kaufman CPA's, P.C. 2012 NY Slip Op 31855(U)    Supreme Court, Suffolk County Judge: Elizabeth H. Emerson we see the distinction.

In this case business buyers claim they were defrauded when business sellers artificially inflated the value of the business through fraud. They sue sellers, sundry others, and their CPAs whom they say were hired to do the due diligence on the value of the business.

"Turning to the motion by the Kauman defendants to dismiss the second cause of action, according the plaintiffs the benefit of every possible favorable inference as a general rule, the plaintiffs have failed to state a second cause of action alleging a breach of fiduciary duty. TheCourt notes that the plaintiffs have alleged a cause of action for accounting malpractice. The existence of negligence claims, however, docs not create a fiduciary relationship between the Kaufman defendants and the plaintiffs (Friedman v Anderson, 23 AD3d 163). In general, there is no fiduciary relationship between an accountant and his client (DG Liquidation, Inc. v Anchin, Block & Anchin, 300 AD2d 70). "A conventional business relationship, without more, does not become a fiduciary relationship by mere allegation" (Friedman v Anderson, supra at 166, Oursler v Women's Interart Center, Jnc., 170 AD2d 407, 408). Here, the complaint alleges that the Kaufman defendants were the plaintiffs' personal accountants, and that the plaintiffs placed confidence in the Kaufman defendants' advice and opinions as professional accountants, consultants and advisors. However, while providing financial advice may be within the scope or an accountant's duties, and so within the definition of a conventional business relationship, the standard that plaintiffs must meet to sustain a cause of action for breach of fiduciary duty has not been met (Staffenberg v Fairfield Pagma Assoc., L.P., 2012 NY AppDiv LEXIS 3423, citing Friedman v Anderson, supra at 166; ef Lavin v Kaufman, Greenhut, Lebowitz & Forman, 226 AD2d 107). Accordingly, the Kaufman defendants' motion to dismiss the second cause of action is granted."
 

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Huge Legal Malpractice Win v. Cadwalader

We reported theRed Zone v. Cadwalader summary judgment news back in September.  Today, the case is complete, andthe Judge awarded $ 16.7 million to plaintiff Red Zone for Cadwalader's failure to carry out its instructions to ensure a letter agreement between Red Zone and UBS Securities LLC which itself memorialized an oral agreement to limit Red Zone's liability for fees to UBS for a Six Flags deal.

Christine Simmons writes in today's NYLJ that the case is ended.  "
Red Zone filed suit against Cadwalader after the Appellate Division, First Department, ruled in 2010 that Red Zone owed UBS $8 million plus interest. In August, Acting Supreme Court Justice Melvin Schweitzer granted summary judgment to Red Zone against Cadwalader but held off on the amount of damages (NYLJ, Sept. 5, 2013).

In a new ruling, Schweitzer awarded Red Zone about $11.7 million in damages and another $1.5 million for its legal fees in the underlying litigation with UBS. With interest, the judgment against Cadwalader totals more than $16.7 million. "The judge awarded to Red Zone every dollar proven in our summary judgment papers," he said in an interview.

Meanwhile, Cadwalader's appeal on the summary judgment decision is pending in the First Department. David Marriott, a partner at Cravath, Swaine & Moore who represented Cadwalader, did not return a message seeking comment, nor did a Cadwalader spokesman."

 

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Multiple Tries Leads to Dismissal of Legal Malpractice Case

In this legal malpractice case, defendant made motions in a seemingly out-of-order fashion, yet succeeded even though. Here is the AD discussing a novel method of moving to dismiss in Shirzadnia v Lecci 2012 NY Slip Op 09043 Appellate Division, Second Department:
 

"The plaintiff commenced the instant action by the filing of a summons and complaint on December 28, 2004. By notice of motion dated February 15, 2005, the defendant moved for an order, inter alia, "pursuant to CPLR 3211 and 3212 dismissing the complaint upon the ground that there is documentary evidence which precludes plaintiff's complaint." In an order dated June 15, 2005, the Supreme Court denied that branch of the defendant's motion which was to dismiss the complaint pursuant to CPLR 3211, without addressing that branch of the motion which was for summary judgment. Following discovery, the defendant, by notice of motion dated June 9, 2011, moved for an order "pursuant to CPLR Rule 3211(a)(1) through (7) and 3212 dismissing the action." The Supreme Court granted that branch of the defendant's motion which was pursuant to CPLR 3212 for summary judgment dismissing the complaint.

The plaintiff's sole argument on appeal is that the Supreme Court should have denied the defendant's motion as either an untimely motion for leave to reargue, or an improper successive motion for summary judgment. However, since the defendant's 2005 motion was made prior to the service of an answer, and the 2011 motion was made following the completion of discovery, the record supports the Supreme Court's determination that the 2005 motion was not properly characterized as one for summary judgment, and that, accordingly, the 2011 motion did not violate the rule against successive motions for summary judgment (see Sutter v Wakefern Food Corp., 69 AD3d 844, 845; see also Kimber Mfg., Inc. v Hanzus, 56 AD3d 615, 616; Williams v City of White Plains, 6 AD3d 609). For similar reasons, the defendant's 2011 motion was not an untimely motion for leave to reargue. "
 

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Does the Attorney Carry Baggage on the Lateral Move?

It's called lateral movement. The New York Law Journal is constantly talking about how mid-level laterals are being sought, or how they are finding difficulty in moving from one firm to another.  Attorneys are constantly in motion, moving from one firm to another.  Because movement is usually a business decision attorneys take care to bring cases and client with them.How does this affect the statute of limitations in legal malpractice, and can the predecessor law firm ever be responsible for later malpractice>

Some cases hold that the former law firm remains on the hook even though the attorney left. Rosenbaum v Sheresky Aronson Mayefsky & Sloan, LLP 2012 NY Slip Op 07651 Decided on November 14, 2012 Appellate Division, Second Department does not. While in the past, the Appellate Division has written: "The statute of limitations was tolled as to defendant because the attorneys who initially handled the matter continued to represent plaintiffs in the matter, albeit at different law firms, until 2005 (see Antoniu v Ahearn, 134 AD2d 151 [1987])", here the result is different.
 

From Rosenbaum: "As alleged in the amended complaint, the plaintiff was represented by the defendant Alton L. Abramowitz and two other members of the defendant firm Sheresky, Aronson, Mayefsky & Sloan, LLP (hereinafter the Sheresky Firm), beginning in February 2006. When Abramowitz joined the defendant firm Mayerson, Stutman, Abramowitz, LLP (hereinafter together the Mayerson Firm defendants), in or around August 2006, he continued to represent the plaintiff pursuant to a retainer agreement with that firm, as did the Sheresky Firm. According to the allegations in the amended complaint, the Mayerson Firm defendants' representation of the plaintiff continued until August 25, 2008, while the Sheresky Firm's representation of the plaintiff continued until approximately February 23, 2009. "
 

"The Mayerson Firm defendants tendered evidentiary material conclusively and indisputably demonstrating that their relationship with the plaintiff ended in March 2007, which was 19 months before the separation agreement was executed. In the interim, successor counsel, the Sheresky Firm, negotiated the separation agreement, which the plaintiff executed in November 2008. Under these circumstances, the Mayerson Firm defendants could not have been a proximate cause of the allegedly "wholly inadequate" separation agreement (see Marshel v Hochberg, 37 AD3d 559; Perks v Lauto & Garabedian, 306 AD2d 261, 261-262; Albin v Pearson, 289 AD2d 272). The remaining allegations of legal malpractice against the Mayerson Firm defendants are conclusory, and the plaintiff's affidavit failed to remedy those defects (see Hashmi v Messiha, 65 AD3d 1193, 1195; Parola, Gross & Marino, P.C. v Susskind, 43 AD3d 1020, 1022; Hart v Scott, 8 AD3d 532). Therefore, the Supreme Court properly granted that branch of the Mayerson Firm defendants' motion which was to dismiss the cause of action alleging legal malpractice insofar as asserted against them. "

 

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Was This Case Lost Because of a Few Words Missing?

Would the words "mutual understanding" have made the difference in this case? Continuous representation by an attorney of a client requires actual work, a mutual understanding that further work has to be performed and a relationship of trust and confidence. In Landow v Snow Becker Krauss P.C. 2012 NY Slip Op 31971(U)    Supreme Court, Nassau County Docket Number: 18038/11 Judge: Denise L. Sher we see a $4 Million legal malpractice case dismissed on statute of limitations. Plaintiff argued continuous representation, and the court finally hung its decision on the following:

"For continuous representation doctrine to apply, for purposes of tolling limitations period for legal malpractice action, there must be clear indicia of an ongoing, continuous, developing and dependent relationship between client and attorney which often includes an attempt by attorney to rectify an alleged act of malpractice; its application is limited to instances in which attorney s involvement in case after alleged malpractice is for performance of the same or related services and is not merely continuation of general professional relationship (emphasis added). See Pellati v. Lite Lite 290 AD.2d 544, 736 N.Y.S.2d 419 (2d Dept. 2002). Also, referencing the language of the case cited by plaintiff Shumsky v. Eisenstein, 96 Y.2d 164, 726 N.Y.S.2d 365 (2001), under the doctrine of continuous representation, the three-year statute of limitations for legal malpractice is tolled while the attorney continues represent the client in the same matter, after the alleged malpractice is committed (emphasis added). Firer, the parries must have a "mutual understanding" that further representation is needed with respect to the matter underlying the malpractice claim. See Hasty Hills Stables, Inc. v. Dorfman, Lynch, Knoebel Conway, LLP 52 AD.3d 566 860 N.Y.S.2d 182 (2d Dept. 2008). Since the Verified Complaint in the instant matter lacks any allegation of a "mutual understanding" between plaintiff and defendants of the need for further representationn regarding the tax opinion and/or DC transaction, the continuous representation doctrine does not apply to the instant matter. In fact, the Verified Complaint and supporting affidavit are devoid of any facts that occurred between any defendant and plaintiff regarding the DC transaction and/or the tax treatment thereof between the time period of2003 (when the alleged malpractice act was committed) and 2007 when defendant Meltzer Lippe was retained. Additionally, a legal malpractice cause of action accrues on the date the malpractice was committed, not when it was discovered. See Byron Chemical Co., Inc. v. Groman 61 AD. 909, 877 N.Y.S.2d 457 (2d Dept. 2009). In other words, the statute does not run from the time plaintiff received notice from the IRS in 2007. Accordingly, the malpractice claims of all defendants are dismissed as time-bared
 

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Sure, We Sued the Wrong Person, But...

Legal malpractice is different from all other areas of litigation, as it has a fourth and unique requirement that "but for" the mistake of the attorney, there would have been a different and better result for plaintiff.  In Portilla v Law Offs. of Arcia & Flanagan   2013 NY Slip Op 08606   Decided on December 26, 2013   Appellate Division, Second Department we see that played out.  In essence, the defendant attorneys admitted suing the wrong person, but argued that it did not matter, because plaintiff could never have won,  The argument failed in Supreme Court and on Appeal.
 

"In an action to recover damages for legal malpractice, a plaintiff must demonstrate that an attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession and that the breach of such duty was the proximate cause of the plaintiff's damages (see Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442; Verdi v Jacoby & Meyers, LLP, 92 AD3d 771, 772; Goldberg v Lenihan, 38 AD3d 598). Proximate cause is established by showing that the plaintiff would have succeeded in the underlying action or would not have incurred damages but for the attorney's negligence (see Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d at 442). Therefore, for a defendant in a legal malpractice case to succeed on a motion for summary judgment, evidence must be presented in admissible form establishing that the plaintiff is unable to prove at least one of these essential elements (see Verdi v Jacoby & Meyers, LLP, 92 AD3d at 772; Goldberg v Lenihan, 38 AD3d at 598).

Here, the appellants failed to establish their prima facie entitlement to judgment as a matter of law. The appellants, who did not dispute that they were negligent in suing the wrong party, failed to establish, prima facie, that the plaintiff was unable to prove that he would have succeeded in his underlying personal injury action (see Gamer v Ross, 49 AD3d 598; J-Mar Serv. Ctr, Inc. v Mahoney, Connor & Hussey, 14 AD3d 482, 483). Accordingly, the Supreme Court properly denied the appellants' motion for summary judgment dismissing the complaint insofar as asserted against them. "

 

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Legal Malpractice and the Conflict of Laws

Reading the beginning of this case immediately brought us back to a Conflicts class at law school, and that's a very long time ago. We were to to analyze an auto accident in which plaintiff resided in state A and the accident took place in state B and the insurer was from state C...well you get the picture. Here in Cambridge Integrated Servs. Group, Inc. v Faber 2012 NY Slip Op 07880 Appellate Division, First Department a NY resident was injured in a MVA in Connecticut while employed by a NJ company who had NJ workers' compensation.
 

"On September 14, 2000, defendant Donald Pressley, a New York City resident, was injured in a tractor-trailer accident in Connecticut during the course of his employment with nonparty Cobra Express Inc., which is located in New Jersey. Fremont Compensation Company (Fremont), the workers' compensation carrier for Cobra Express, paid Pressley New Jersey workers' compensation benefits, making the last payment to Pressley on May 9, 2002.

On or about September 19, 2000, Pressley retained nonparty Paul A. Shneyer, Esq., to bring a personal injury lawsuit for injuries he sustained in the accident. When Shneyer failed to timely commence an action, Pressley commenced a malpractice action against him. The Faber defendants represented Pressley in that action and settled the case against Shneyer in December 2008. On March 24, 2009, plaintiff, the administrator for Fremont (now in liquidation), commenced the instant action to enforce a lien against the settlement proceeds.

The Faber defendants maintain that under Matter of Shutter v Phillips Display Components Co. (90 NY2d 703 [1997]), New Jersey cases holding that workers' compensation liens attach to legal malpractice recoveries (see Frazier v New Jersey Mfrs. Ins. Co., 142 NJ 590, 667 A2d 670 [1995]; Utica Mut. Ins. Co. v Maran & Maran, 142 NJ 609, 667 A2d 680 [1995]) do not apply in this case because the malpractice recovery did not duplicate the medical payments and lost wages Pressley received under workers' compensation. This argument is unavailing. Pursuant to a June 2010 order from which the Faber defendants did not appeal, New Jersey law applies to the merits of plaintiff's claims and thus, New York law regarding double recoveries is inapplicable. [*2]

Under New Jersey law, a double recovery "occurs when the employee keeps any workers' compensation benefits that have been matched by recovery against the liable third person" (Frazier, 142 NJ at 602, 667 A2d at 676 [emphasis in original]), rendering irrelevant whether the settlement of the legal malpractice action included medical expenses and lost wages. We note, however, that even if New York law applied, the settlement did not specify what it was for and therefore, we cannot conclude that no part of it was for medical expenses and lost wages.

Defendants' argument that the application of New Jersey law in this case violates New York public policy because Pressley is a New York resident fails because although defendants have shown that New York and New Jersey law differ on this issue, they have not satisfied the stringent test for rejecting New Jersey law as against New York public policy (see 19A NY Jur 2d, Conflict of Laws § 17).

Contrary to defendants' argument, the instant action is not time-barred. As agreed to by the parties, New York's three year statute of limitations is applicable. We agree with the motion court that plaintiff's claim accrued when Pressley received the settlement payment from Shneyer (see Aetna Life & Cas. Co. v Nelson, 67 NY2d 169, 175-176 [1986]). "
 

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It's Not Always "Happily Ever After"

Husband suffers personal injury in a fall from a scaffold. He resolves the case for $1M. Even at that number, he and wife then succeed in a legal malpractice case for an additional $ 297,000. What happens then? Burnett v Burnett, 2012 NY Slip Op 08850  Appellate Division, Third Department tells the sad but familiar story of everything unraveling.
 

"The parties were married in 1974 and raised six grown children. During the course of the marriage, plaintiff (hereinafter the wife) worked within the home and defendant (hereinafter the husband) was the primary wage earner, excluding a period during the marriage — described by Supreme Court as "significant" in duration — when the husband left the wife and children dependant upon public assistance benefits and charity from her family. In 2002, in the course of his employment, the husband suffered personal injuries in a fall from a scaffold. In 2006, the parties settled their claims for personal injury and loss of consortium in the combined net sum of $1 million and deposited the funds into a joint investment account managed by their son, with the stated intention of drawing $4,000 monthly from the account for their household expenses and support. In 2007, they jointly obtained a settlement payment upon a legal malpractice action (arising from the underlying personal injury and consortium claims) in the sum of roughly $297,000. The husband deposited this check into his separate account. Thereafter, the husband engaged in extensive and habitual gambling, depleting the accounts. After learning of an adulterous affair in 2009, the wife withdrew the remaining balance of just under $140,000 from the joint investment account. The husband has never accounted for the funds from the malpractice settlement and Supreme Court found, based upon this failure and upon his "less than forthcoming testimony," that the possibility remained that he had secreted or transferred assets.

Supreme Court awarded the wife title to the marital residence, the remaining balance of [*2]the investment account, and the household furnishings and farm equipment. The husband received his checking account, plumbing business and equipment, and a motor boat and trailer. The husband appeals.

We reject the husband's contention that Supreme Court erred in determining that the settlement funds were marital property. Although the governing statute provides that compensation for personal injury constitutes separate property (see Domestic Relations Law § 236 [B] [1] [d] [2]), here, Supreme Court noted the complete lack of any evidence upon which the funds might have been allocated as between the husband's personal injury claim and the wife's consortium claim, and the substantial evidence supporting the legal presumption that the parties wished to treat the proceeds as joint assets of the marriage (see Cameron v Cameron, 22 AD3d 911, 912 [2005]; Garner v Garner, 307 AD2d 510, 512 [2003], lv denied 100 NY2d 516 [2003])."

 

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Too Eager to Dismiss a Legal Malpractice Claim?

We've asked in the past whether there is an institutional bias against legal malpractice cases. Self-regulation of industries ( the LIBOR, for example) often lacks any rigor. The legal world also, in a way, self regulates. It is after all, rules for attorneys, written by attorneys, administered and judged by attorneys. In Wiener v Epstein 2012 NY Slip Op 22277   Appellate Term, First Department we see the Appellate Term reversing Civil Court on a summary judgment dismissal. Was Civil Court too ready to decide the underlying "but for" issues?
 

"Plaintiffs' legal malpractice claim is not ripe for summary dismissal, since the defendant law firm failed in its burden to demonstrate the absence of a triable issue as to whether plaintiffs would have prevailed to some extent in the underlying action but for defendant's alleged malpractice (see Cruz v Durst Law Firm, 273 AD2d 120 [2000]), i.e., failing in the underlying action to identify and timely serve a notice of claim upon the Hudson River Park Trust ("Trust"), the record owner of the bicycle path on which the first-named plaintiff was injured.

Giving plaintiffs the benefit of every favorable inference (see Ortega v Everest Realty LLC, 84 AD3d 542, 545 [2011]), the record contains circumstantial evidence sufficient to permit a fact-finder to determine that the condition which allegedly caused the first-named plaintiff to fall from his bicycle - described as a six foot by three foot patch of a "glass bead-like material used in the painting of bike ways ... to provide better visibility" - was created by a contractor retained by the Trust (see Schneider v King's Highway Hosp. Ctr., 67 NY2d 743, 744-745 [1986]; Chimilio-Ramos v Banguera, 62 AD3d 538 [2009]; Carboy v. Cauldwell-Wingate Co., Inc. 43 AD3d 261, 262-263 [2007]; Berner v 2061 A Bartow Food Corp., 279 AD2d 275 [2001]), for which the Trust may have been held vicariously liable, if properly sued in the underlying action, based upon its nondelegable duty as the owner of the public bicycle path (see Sarisohn v 341 Commack Rd., Inc., 89 AD3d 1007, 1008 [2011]; Hill v Fence Man, Inc., 78 AD3d 1002, 1004 [2010]; Correa v City of New York, 66 AD3d 573, 574-575 [2009]). Thus, the lack of prior notice to the Trust of the hazard was not dispositive of the Trust's potential liability (see Jabbour v Finnegan's Moving & Warehouse Corp., 299 AD2d 192 [2002]; Katz v City of [*2]New York, 231 AD2d 448 [1996]).

Defendant's summary judgment evidence failed to conclusively establish that a contractor retained by the Trust did not cause or create the pathway condition that allegedly caused the first-named plaintiff's injuries. The deposition testimony of the Department of Transportation ("DOT") employee (Patel) did not serve to absolve the Trust of potential liability, since Patel testified that "it is possible" that the Trust could have contracted for the repair or painting of the bike path without DOT's knowledge.

The record so far developed raises triable issues as to whether plaintiffs would have prevailed in the underlying personal injury litigation "but for" defendant's negligence (cf. Wo Yee Hing Realty Corp. v Stern, ___ AD3d ___, 2012 NY Slip Op 05792 [1st Dept 2012]). "
 

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Defendants Fail to Require Joinder or Obtain Dismissal

Defendants in this legal malpractice case argued that there was a missing party, and that the lack of privity between plaintiff and the defendant attorney was fatal.  They lost in Supreme Court, and on appeal, continued to lose.

Mr. San, LLC v Zucker & Kwestel, LLP   2013 NY Slip Op 08416   Decided on December 18, 2013  Appellate Division, Second Department  held that Justice Bucaria was correct when he denied defendant's motion. 
 "Applying these principles, the Supreme Court properly denied those branches of the defendants' motion which were pursuant to CPLR 3211(a)(1) and (7) to dismiss the first cause of action, which sought to recover damages for legal malpractice. While the complaint does not allege an attorney-client relationship between the plaintiffs and the defendants, it sets forth a claim which falls within "the narrow exception of fraud, collusion, malicious acts or other special circumstances" under which a cause of action alleging attorney malpractice may be asserted absent a showing of privity (Ginsburg Dev. Cos., LLC v Carbone, 85 AD3d 1110, 1112 [internal quotation marks omitted]; see Aranki v Goldman & Assoc., LLP, 34 AD3d 510, 511-512; Griffith v Medical Quadrangle, Inc., 5 AD3d 151, 152). Furthermore, the documentary evidence submitted by the defendants does not conclusively establish a defense to this cause of action as a matter of law (see CPLR 3211[a][1]).

Contrary to the defendants' contention, the Supreme Court providently exercised its discretion in denying that branch of the defendants' motion which was pursuant to CPLR 1001 to direct the plaintiffs to join BarCred Holdings Affiliates, LLC (hereinafter BarCred), as a party plaintiff. The defendants failed to demonstrate that BarCred needed to be joined in order to accord complete relief between the parties, or that BarCred would be inequitably affected by a judgment in this action absent its joinder (see CPLR 1001[a]; Mason Tenders Dist. Council Welfare Fund v Diamond Constr. & Maintenance, Inc., 84 AD3d 754, 755; Spector v Toys "R" Us, Inc., 12 AD3d 358, 359; O'Brien v Town of Huntington, 308 AD2d 479, 481). "

 

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Spoliation of Evidence and Legal Malpractice

This is a convoluted case, which started as a products liability-fall from a ladder- case, morphed into a legal malpractice case, went to trial and was prematurely dismissed during plaintiff's case, was reversed on appeal and now comes back on a preclusion motion. The problem in Burbige v Siben & Ferber 2012 NY Slip Op 32086(U)   Sup Ct, Nassau County Docket Number: 010334/07 Judge: Randy Sue Marber is that there is no ladder. In this case, no ladder, no proof that the ladder was defective. Whose fault is it?

"As to the order of preclusion, this Court begins with noting that, here, the Appellate Division has not only directed a new trial but has specifically set forth the evidentiary issue inadequately established at the original trial by the Plaintiff; to wit plaintiff() fail ( ed) to make an offer of proof that he would have been successful in the underlying products liability action by offering expert testimony that the ladder from which he fell was defective. Consequently, the issue becomes whether the Plaintiff should be permitted to now present evidence that it could have properly presented at the first trial, the expert affidavit necessary to establish his success in the underlying products liability action.

Based upon the papers presented for this Court' s consideration, this Court finds that the Plaintiff s failure to disclose his expert was in fact willful and intentional. Indeed the Appellate Division found that the Plaintiff s offer of proof was inadequate and wholly insufficient due to the absence of an expert affidavit demonstrating the merits of the underlying products liability action. Perhaps more critical is the fact that counsel for the Plaintiff, in support of his cross-motion infra again states that "the case law and the circumstances do not war ant the plaintiff to obtain an expert" (Aff. In Supp. Of Cross- Motion 6). Furthermore, the Plaintiff has failed entirely, even at this juncture in opposition
to the Defendants s instant motion, to proffer a reasonable excuse, under the circumstances
for his delay in furnishing name and affidavit of his expert (CPLR ~ 3101 (d) (I); Wartski v. C.W Post Campus of Long Is. Univ. 63 A.DJd 916 917 (2 Dept. 2009)). Moreover the Defendants wil clearly be prejudiced should this Court determination be to permit the Plaintiff to now submit the name and testimony of their expert. Although a new trial has been granted by the Appellate Division and further that the Appellate Division has specifically set forth the evidentiary issue inadequately
established at the original trial, the fact is that the Plaintiff has, nonetheless, failed to meet his burden, under CPLR ~ 3101 that would sufficiently oppose the Defendants' entitlement to preclusion. In fact, the Plaintiff has even failed to establish his burden under 22 NYCRR 202.21 (d) that would permit this Court to award post-note of issue discovery (cf Scanga Family Practice Assocs. of Rockland, P. c., 2006 WL 6822760 (Sup. Ct. Rockland 2006); Bierzynskiv. New York Central Railroad Co. 59 Misc. 2d 315 (Sup. Ct. Erie 1969) aff' d29 2d 804 (1971) rearg. denied 30 N. 2d 790 (1972)).

Counsel for the Plaintiff bases his entire motion on a spoliation of the evidence argument; that is, counsel for the Plaintiff submits that allegedly for more than 16 years counsel for the Defendants, failed to inspect and preserve the defective ladder, failed to obtain expert reports with respect to the defectively manufactured ladder, and effectively destroyed the key physical evidence of the defective ladder prior to the commencement of the Plaintiff s legal malpractice action. Spoliation of evidence is a factual and legal question in this malpractice case involving an underlying products liability claim. Spoliation of evidence occurs where a litigant intentionally or negligently disposes of crucial items of evidence before his or her adversaries have any opportunity to inspect them (Kirkland v. New York City Housing Authority, 236 A. 2d 170 (1st Dept. 1997)).

The underlying action was one sounding in products liability. The Plaintiff claims herein that the product that was alleged to be defectively designed or manufactured the ladder, was negligently or intentionally lost or destroyed subsequent to his accident and before anyone had an opportunity to inspect it. Although the Plaintiff charges his former attorneys in the underlying action, the Defendants herein, with spoliation of evidence, the Plaintiff makes no attempts to show that the ladder in question was ever in the possession of the Defendants or that it existed or was available when they were retained. "
 

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Is This a Paradigm of Legal Representation?

The question of how a competent and qualified attorney would handle a case is the crux of Bua v Purcell & Ingrao, P.C. 2012 NY Slip Op 06908    Appellate Division, Second Department . At issue is whether attorney committed malpractice in the termination of a real estate contract of sale.

"The plaintiff commenced this action to recover damages allegedly sustained as a result of the defendants' legal malpractice. The amended complaint alleged that the plaintiff retained the defendants to represent and advise him in connection with the sale of certain real property. The plaintiff entered into a contract of sale with a buyer, who tendered a deposit to be held in escrow. The amended complaint further alleged that, prior to the closing date, the buyer's attorney attempted to terminate the contract of sale because the buyer was unable to obtain financing for the purchase. The defendant Joseph A. Ingrao informed the plaintiff that the buyer wished to cancel the contract of sale, and the plaintiff agreed to cancel the contract and return the deposit.

The amended complaint stated that Ingrao sent the buyer's attorney a letter "purporting to terminate" the contract of sale and returning the deposit. More than seven months later, however, the buyer attempted to revive the contract of sale and purchase the property under its terms. The plaintiff refused, maintaining that the contract had been terminated. The buyer subsequently commenced an action against the plaintiff for specific performance of the contract of sale and filed a notice of pendency. In that action, the plaintiff argued, inter alia, that the contract of sale, had been terminated when the deposit was returned. The plaintiff also commenced a holdover proceeding. The plaintiff ultimately prevailed in the specific performance action.

The amended complaint asserted that the defendants committed malpractice by failing to "obtain a clear and unambiguous termination of the [contract of sale] after [the buyer's] attorneys advised Ingrao that she wished to terminate the [contract of sale]." The amended complaint listed various things that the plaintiff claimed the defendants "should have done" in order to accomplish [*2]a "clear and unambiguous" termination of the contract of sale. "

"The standard to which the defendant's conduct is to be compared is not that of the most highly skilled attorney, nor is it that of the average member of the legal profession, but that of an attorney who is competent and qualified (see Restatement [Second] of Torts: Negligence § 299A, Comment e). The conduct of legal matters routinely "involve[ ] questions of judgment and discretion as to which even the most distinguished members of the profession may differ" (Byrnes v Palmer, 18 App Div 1, 4, affd 160 NY 699). Absent an express agreement, an attorney is not a guarantor of a particular result (see Byrnes v Palmer, 18 App Div at 4; see also 1B NY PJI3d 2:152, at 140-141 [2012]), and may not be held "liable in negligence for . . . the exercise of appropriate judgment that leads to an unsuccessful result" (Rubinberg v Walker, 252 AD2d 466, 467; see Grago v Robertson, 49 AD2d 645, 646; see also PJI 2:152).

It follows that "[the] selection of one among several reasonable courses of action does not constitute malpractice" (Rosner v Paley, 65 NY2d 736, 738; see Dimond v Kazmierczuk & McGrath, 15 AD3d 526, 527). Attorneys are free to act in a manner that is "reasonable and consistent with the law as it existed at the time of representation," without exposing themselves to liability for malpractice (Darby & Darby v VSI Intl., 95 NY2d 308, 315; see Noone v Stieglitz, 59 AD3d 505, 507; Iocovello v Weingrad & Weingrad, 4 AD3d 208, 208). "

 

"In conclusion, as the plaintiff effectively concedes, he is estopped from denying that the defendants effected a legally valid termination of the contract of sale. To the extent that the allegations in the amended complaint are not barred by the doctrine of judicial estoppel, they fail to state a cause of action to recover damages for legal malpractice. Accordingly, the defendants' motion to dismiss the amended complaint was properly granted and the plaintiff's cross motion was properly denied as academic."
 

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How to Use an Expert in Legal Malpractice Litigation

There is nothing new in the case of Jack Hall Plumbing & Heating, Inc. v Duffy 2012 NY Slip Op 07249   Appellate Division, Third Department , merely a restatement of the long-standing and settled rule that expert opinion is required to show that there was / was not a departure from good and accepted practice. Supreme Court got it wrong, and the Third Department corrected Supreme Court, not once but twice.
 

"Soon after entering into the agreement, the relationship between the Halls and Scudder [*2]deteriorated to the point that Hall became concerned that he and his sons were in danger of losing the business due to Scudder's mismanagement. Accordingly, Hall sought legal advice from defendant H. Wayne Judge concerning how to terminate Scudder in compliance with the employment agreement and in view of the urgency caused by the perceived danger to the business. After their meeting, Judge drafted a letter for Hall to give to Scudder. The letter outlined the reasons for Scudder's termination and informed him that it was effective immediately. Hall and his sons then unanimously voted to terminate Scudder without giving Scudder notice and an opportunity to respond, after which Hall gave Scudder the letter drafted by Judge. Scudder responded by commencing an action against plaintiff for breach of the employment agreement. Although plaintiff, represented by Judge, prevailed at the trial of that action, we reversed and found that plaintiff failed to comply with the unambiguous terms of the employment agreement by terminating Scudder without any notice or opportunity to respond (Scudder v Jack Hall Plumbing & Heating, 302 AD2d 848 [2003]). Plaintiff then commenced this action alleging that defendants committed legal malpractice by negligently advising plaintiff in connection with Scudder's termination. After joinder of issue and discovery, defendants moved for summary judgment dismissing plaintiff's complaint. Finding that plaintiff's opposing papers were inadequate to raise an issue of fact, Supreme Court granted the motion.

Plaintiff contends on appeal that defendants failed to meet their initial burden of presenting evidence in admissible form establishing that they had exercised the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession in discharging their obligations to plaintiff (see Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442 [2007]; Geraci v Munnelly, 85 AD3d 1361, 1362 [2011]; Adamski v Lama, 56 AD3d 1071, 1072 [2008]). This issue of the adequacy of the professional services provided here requires a professional or expert opinion to define the standard of professional care and skill owed to plaintiff and to establish whether the attorney's conduct complied with that standard (see Tabner v Drake, 9 AD3d 606, 610 [2004]; Ehlinger v Ruberti, Girvin & Ferlazzo, 304 AD2d 925, 926 [2003]; Greene v Payne, Wood & Littlejohn, 197 AD2d 664, 666 [1993]). Plaintiff argues that the affirmation by Judge submitted in support of defendants' motion for summary judgment fails to establish his prima facie compliance with the standard of care. We must agree.

According to Judge, based on his reading of the contract and plaintiff's bylaws, he formed a legal opinion that the employment agreement was ambiguous and that immediate termination was consistent with its terms. Judge was motivated, however, by Hall's desire for urgency and his own view that engaging in the termination process provided for by the agreement would damage plaintiff's business. While Judge offers his legal conclusion and the business-related motivation behind it, his affirmation is insufficient to establish compliance with the applicable standard of care because he neither defines that standard nor explains that a reasonable attorney would reach the same conclusion that he did on the facts as they were presented to him. In short, Judge's explanation of the urgency of the business factors that he considered in formulating the advice that he gave fails to establish that his legal advice was within the standard of care.

Further, Judge's reliance on the fact that he initially prevailed at trial as proof that his interpretation of the employment agreement was reasonable is also misplaced as that order was reversed by this Court on the law (Scudder v Jack Hall Plumbing & Heating, 302 AD2d at 851). Accordingly, the argument that any error was one of judgment in selecting between reasonable alternatives must fail in light of the lack of a prima facie showing that the legal advice provided was a reasonable course of action. Inasmuch as defendants failed to shift the burden to plaintiff [*3]to demonstrate a departure from the standard of care, the motion for summary judgment should have been denied (see Suppiah v Kalish, 76 AD3d 829, 832 [2010]; Ehlinger v Ruberti, Girvin & Ferlazzo, 304 AD2d at 927; Estate of Nevelson v Carro, Spanbock, Kaster & Cuiffo, 259 AD2d 282, 284 [1999]). "
 

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Early Summary Judgment Motion Fails in a Legal Malpractice Case

We have mused on the eagerness with which Courts sometimes exhibit in granting early dismissal of legal malpractice cases, sometimes prematurely grappling with the "but for" portion of the case well before a good record is developed.  In Carter Ledyard & Millburn LLP v Pearl Seas Cruises, LLC  2013 NY Slip Op 33081(U)  December 5, 2013  Sup Ct, New York County  Docket Number: 155872/2013  Judge: Eileen A. Rakower we see a reasoned approach to the motion practice.  The Court notes that there are questions of fact on whether the client objected to attorney's bills, and decides that the affirmative defenses are well pleaded.  From the decision:

"Kennedy avers that in August 2008, pursuant to a written letter of engagement, Pearl Seas retained Plaintiff as legal counsel in connection with a pending arbitration arising out of a contract for the construction of a passenger vessel, Plaintiff continued to represent Pearl Seas through October 7, 2011, Plaintiff continued to send invoices to Pearl Seas for its services, Pearl Seas
admitted receiving and retaining invoices from Plaintiff and made partial payments. In opposition, Defendant submits the affidavit of Charles A. Robertson, which avers that Pearl Seas repeatedly complained about Kennedy's performance, objected to the firm's invoices, and terminated the firm due to Kennedy's performance. Furthermore, Defendant contends that discovery is needed from
Plaintiff, including documents and testimony from Kennedy and his associate, Christopher Rizzo, regarding Defendant's complaints about Kennedy's performance and objection to Plaintiffs invoices."

In light of issues of fact concerning whether Defendant objected to the invoices and Plaintiff's performance and Defendant's outstanding First Notice for Discovery and Inspection and Notice to Take Deposition, Plaintiff's motion for summary judgment is denied."

"On a motion to dismiss pursuant to CPLR §321 l(a)(l) "the court may grant dismissal when documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law." (Beal Sav. Bank v. Sommer, 8 NY3d 318, 324 [2007]) (internal citations omitted) "When evidentiary material is considered, the criterion is whether the proponent of the pleading has a cause of action, not whether he has stated one." (Guggenheimer v. Ginzburg, 43 N.Y.2d
268, 2 7 5 [ 1977]) (emphasis added). A movant is entitled to dismissal under CPLR §3211 when his or her evidentiary submissions flatly contradict the legal conclusions and factual allegations of the complaint. (Rivietz v. Wolohojian, 3 8 A.D.3d 301 [1st Dept. 2007]) (citation omitted). Pearl Seas sets forth the following "facts common to all counterclaims:"

13. Mr. Kennedy advised Pearl Seas that the company would prevail in its dispute with Irving Shipbuilding. He repeatedly gave assurances of success to Pearl Seas, all of which failed, as described below, because of his poor performance and legal malpractice.
14. However, Mr. Kennedy's performance was in sharp contrast to his assurances. In fact, Mr. Kennedy's and Counterclaim Defendants' performance as counsel for Pearl Seas fell far below the standard of care required of attorneys.
15. Specifically, and among other failings, Mr. Kennedy was routinely unprepared for appearances before the arbitration panel and in federal court.

16. Mr. Kennedy also failed to adequately understand critical legal issues, including the law relating to the issuance and timing of classification certificates. 17. Mr. Kennedy's cross-examinations of key witnesses at the arbitration hearing were poor. They were unfocused, poorly conceived, and poorly executed. Indeed, Mr. Kennedy's cross-examinations were so poor that
Pearl Seas forced him to allow his junior associate to examine a key witness. 18. Mr. Kennedy's arguments to the arbitration panel were equally poor. He failed to make obvious arguments, and was extremely combative with the panel. 19. Mr. Kennedy also botched a key witness interview with a potentially critical witness, James Shephard, which further compromised Pearl Seas' case.
20. From Pearl Seas' perspective, Mr. Kennedy's poor performance in the arbitration had caused the arbitration panel to tum against it, notwithstanding his repeated assurances of success. Indeed, Pearl Seas expected to do far better than they ultimately did in the arbitration, which
was a direct result of Counterclaim Defendants' malpractice. 21. Mr. Kennedy also exhibited strange and unprofessional behavior outside of the arbitration. He was unwilling to take advice from anyone else, and did not work well with the term that Pearl Seas had put in place. He was unfocused and scatterbrained. He would frequently cut critical meetings short in order to get home to watch a television program that he said he was "addicted to."
22. Fearful that it was going to lose what was a winnable case, on or about October 7, 2011, Pearl Seas terminated Mr. Kennedy and his firm's representation of the company. Pearl Seas was forced to retain another law firm, which only added to the expenses related to the arbitration, but which
did turn the case around immediately and produced an acceptable result. 23. In total, Pearl Seas paid Counterclaim Defendant more than $2.2 million for its services, which had no value. That does not include the amounts that Counterclaim Defendant claim are due in this lawsuit.
24. Pearl Seas repeatedly made clear that it was unhappy with Mr. Kennedy's performance, and that it disputed the amounts billed to it."

"Accepting all allegations as true, Defendant has stated a counterclaim for legal malpractice and Plaintiffs proffered evidentiary submissions do not flatly contradict the legal conclusions and factual allegations of this counterclaim."

 

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Early Summary Judgment Motion Fails in a Legal Malpractice Case

We have mused on the eagerness with which Courts sometimes exhibit in granting early dismissal of legal malpractice cases, sometimes prematurely grappling with the "but for" portion of the case well before a good record is developed.  In Carter Ledyard & Millburn LLP v Pearl Seas Cruises, LLC  2013 NY Slip Op 33081(U)  December 5, 2013  Sup Ct, New York County  Docket Number: 155872/2013  Judge: Eileen A. Rakower we see a reasoned approach to the motion practice.  The Court notes that there are questions of fact on whether the client objected to attorney's bills, and decides that the affirmative defenses are well pleaded.  From the decision:

"Kennedy avers that in August 2008, pursuant to a written letter of engagement, Pearl Seas retained Plaintiff as legal counsel in connection with a pending arbitration arising out of a contract for the construction of a passenger vessel, Plaintiff continued to represent Pearl Seas through October 7, 2011, Plaintiff continued to send invoices to Pearl Seas for its services, Pearl Seas
admitted receiving and retaining invoices from Plaintiff and made partial payments. In opposition, Defendant submits the affidavit of Charles A. Robertson, which avers that Pearl Seas repeatedly complained about Kennedy's performance, objected to the firm's invoices, and terminated the firm due to Kennedy's performance. Furthermore, Defendant contends that discovery is needed from
Plaintiff, including documents and testimony from Kennedy and his associate, Christopher Rizzo, regarding Defendant's complaints about Kennedy's performance and objection to Plaintiffs invoices."

In light of issues of fact concerning whether Defendant objected to the invoices and Plaintiff's performance and Defendant's outstanding First Notice for Discovery and Inspection and Notice to Take Deposition, Plaintiff's motion for summary judgment is denied."

"On a motion to dismiss pursuant to CPLR §321 l(a)(l) "the court may grant dismissal when documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law." (Beal Sav. Bank v. Sommer, 8 NY3d 318, 324 [2007]) (internal citations omitted) "When evidentiary material is considered, the criterion is whether the proponent of the pleading has a cause of action, not whether he has stated one." (Guggenheimer v. Ginzburg, 43 N.Y.2d
268, 2 7 5 [ 1977]) (emphasis added). A movant is entitled to dismissal under CPLR §3211 when his or her evidentiary submissions flatly contradict the legal conclusions and factual allegations of the complaint. (Rivietz v. Wolohojian, 3 8 A.D.3d 301 [1st Dept. 2007]) (citation omitted). Pearl Seas sets forth the following "facts common to all counterclaims:"

13. Mr. Kennedy advised Pearl Seas that the company would prevail in its dispute with Irving Shipbuilding. He repeatedly gave assurances of success to Pearl Seas, all of which failed, as described below, because of his poor performance and legal malpractice.
14. However, Mr. Kennedy's performance was in sharp contrast to his assurances. In fact, Mr. Kennedy's and Counterclaim Defendants' performance as counsel for Pearl Seas fell far below the standard of care required of attorneys.
15. Specifically, and among other failings, Mr. Kennedy was routinely unprepared for appearances before the arbitration panel and in federal court.

16. Mr. Kennedy also failed to adequately understand critical legal issues, including the law relating to the issuance and timing of classification certificates. 17. Mr. Kennedy's cross-examinations of key witnesses at the arbitration hearing were poor. They were unfocused, poorly conceived, and poorly executed. Indeed, Mr. Kennedy's cross-examinations were so poor that
Pearl Seas forced him to allow his junior associate to examine a key witness. 18. Mr. Kennedy's arguments to the arbitration panel were equally poor. He failed to make obvious arguments, and was extremely combative with the panel. 19. Mr. Kennedy also botched a key witness interview with a potentially critical witness, James Shephard, which further compromised Pearl Seas' case.
20. From Pearl Seas' perspective, Mr. Kennedy's poor performance in the arbitration had caused the arbitration panel to tum against it, notwithstanding his repeated assurances of success. Indeed, Pearl Seas expected to do far better than they ultimately did in the arbitration, which
was a direct result of Counterclaim Defendants' malpractice. 21. Mr. Kennedy also exhibited strange and unprofessional behavior outside of the arbitration. He was unwilling to take advice from anyone else, and did not work well with the term that Pearl Seas had put in place. He was unfocused and scatterbrained. He would frequently cut critical meetings short in order to get home to watch a television program that he said he was "addicted to."
22. Fearful that it was going to lose what was a winnable case, on or about October 7, 2011, Pearl Seas terminated Mr. Kennedy and his firm's representation of the company. Pearl Seas was forced to retain another law firm, which only added to the expenses related to the arbitration, but which
did turn the case around immediately and produced an acceptable result. 23. In total, Pearl Seas paid Counterclaim Defendant more than $2.2 million for its services, which had no value. That does not include the amounts that Counterclaim Defendant claim are due in this lawsuit.
24. Pearl Seas repeatedly made clear that it was unhappy with Mr. Kennedy's performance, and that it disputed the amounts billed to it."

"Accepting all allegations as true, Defendant has stated a counterclaim for legal malpractice and Plaintiffs proffered evidentiary submissions do not flatly contradict the legal conclusions and factual allegations of this counterclaim."

 

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Unsophisticated Legal Malpractice Claims in a Sophisticated Commercial Case

High end financing companies tailored to the art and antique world hit a bare patch, and suddenly are in $20 Million + financing difficulties.  They hire plaintiff law firm in the Hahn & Hessen LLP v Peck   2013 NY Slip Op 33017(U)  November 25, 2013  Sup Ct, New York County  Docket Number: 603122/08  Judge: Barbara Jaffe which is seeking its attorney fees.  Simply put, in the face of extremely sophisticated financing agreements, and multiple-draft settlement agreements of disputes valued at over $ 20 million, counterclaimant's case derives from the unsophisticated claims that he was unaware of the terms of the settlements.

"In 2007, SageCrest II, LLC (SageCrest), a private equity firm, sued defendants, alleging  that they had defaulted under the terms of a loan. (SageCrest II LLC v ACG Credit Company, LLC, et al., index No. 600195/2007). (NYSCEF 157). On or about September 11, 2007, another justice of this court granted an ex parte order of attachment against defendants ACG Credit Company, LLC and Art Capital Group II, LLC (ACG II), securing $29,841,156.19 allegedly owed SageCrest. Following a mediation session on January 25, 2008, the parties signed a shortform settlement agreement, which, inter alia, requires that defendants pay SageCrest $29,925,000, $21 million of which would effectively vacate the order of attachment. The agreement is subject to further revisions and final documentation, and either party is authorized to submit it to the court to be so-ordered. (Id., Exh. B).Unable to secure the $21 million, defendants, represented by plaintiff, sought to renegotiate the terms of the settlement, offering $14.3 million in cash and an assignment of $6.7 million in loans due defendant ACG II. SageCrest rejected defendants' offer and sought by motion to have the court so-order the short-form agreement. (NYSCEF 157, Exh. C). In response, defendants sought, also by motion, to have the proposed assignment treated as the "cash equivalent" of the $6.7 million. They attached to their motion an affidavit from Peck asserting his repeated and unsuccessful efforts to assure SageCrest that the loans would be paid. (Id., Exh. D). "

"At an EBT held on June 27, 2011, Peck testified that he recalled questioning Newman on May 18 as to whether the agreement protected him personally, and that Newman responded that the pledged loans were the sole security for the assignment, along with the "credit enhancement
of my limited personal guarantee," and that this limitation of liability was the "beauty of the settlement." (NYSCEF 168). Although Peck conceded that he had no reason to believe that SageCrest had agreed to the sole recourse provision, he nonetheless maintained that he thought
that the sole recourse provision was included in the final agreement. (NYSCEF 168).At an EBT held on June 27, 2011, Peck testified that he recalled questioning Newman on May 18 as to whether the agreement protected him personally, and that Newman responded that the pledged loans were the sole security for the assignment, along with the "credit enhancement of my limited personal guarantee," and that this limitation of liability was the "beauty of the settlement." (NYSCEF 168). Although Peck conceded that he had no reason to believe that SageCrest had agreed to the sole recourse provision, he nonetheless maintained that he thought that the sole recourse provision was included in the final agreement. (NYSCEF 168)."

"Plaintiff has thus established, primafacie, that it did not breach the standard of professional care and that its actions were not the proximate cause of the 2009 action. (See Engelke v Brown Rudnick Berlack Israels LLP, _ NYS2d _, 2013 NY Slip Op 07419 [1st Dept 2013] [plaintiff could not show with sufficient certainty that, absent alleged malpractice, he would have been able to avert defending second lawsuit]; Natural Organics Inc. v Anderson Kill & Glick, P.C., 67 AD3d 541, 542 [1st Dept 2009], Iv dismissed 14 NY3d 881 [2010] [plaintiff failed to demonstrate causal connection between alleged malpractice and injuries]; Cohen v Weitzner, 47 AD3d 594, 595 [1st Dept 2008] [typographical error on defendant attorneys'  spreadsheet not proximate cause of plaintiffs' injury]; Leder v Speigel, 31 AD3d 266, 268 [1st Dept 2006], affd 9 NY3d 836 [2007], cert denied 552 US 1257 [2008] [plaintiffs malpractice claim based on unsupported, conclusory assertion that defendant's alleged erroneous advice proximately caused injury]; Merz v Seaman, 265 AD2d 385, 389 [2d Dept 1999] [defendant attorneys who allegedly negligently drafted contract not liable for failing to warn banker-client about repercussions of personal guarantee]; Levine v Lacher & Lovell-Taylor, 256 AD2d 147 [1st Dept 1998] [plaintiffs disposition of collateral in disregard of court order was sole proximate cause of his injury; that alleged negligent drafting of loan agreement contributed to injury ..."

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Unsophisticated Legal Malpractice Claims in a Sophisticated Commercial Case

High end financing companies tailored to the art and antique world hit a bare patch, and suddenly are in $20 Million + financing difficulties.  They hire plaintiff law firm in the Hahn & Hessen LLP v Peck   2013 NY Slip Op 33017(U)  November 25, 2013  Sup Ct, New York County  Docket Number: 603122/08  Judge: Barbara Jaffe which is seeking its attorney fees.  Simply put, in the face of extremely sophisticated financing agreements, and multiple-draft settlement agreements of disputes valued at over $ 20 million, counterclaimant's case derives from the unsophisticated claims that he was unaware of the terms of the settlements.

"In 2007, SageCrest II, LLC (SageCrest), a private equity firm, sued defendants, alleging  that they had defaulted under the terms of a loan. (SageCrest II LLC v ACG Credit Company, LLC, et al., index No. 600195/2007). (NYSCEF 157). On or about September 11, 2007, another justice of this court granted an ex parte order of attachment against defendants ACG Credit Company, LLC and Art Capital Group II, LLC (ACG II), securing $29,841,156.19 allegedly owed SageCrest. Following a mediation session on January 25, 2008, the parties signed a shortform settlement agreement, which, inter alia, requires that defendants pay SageCrest $29,925,000, $21 million of which would effectively vacate the order of attachment. The agreement is subject to further revisions and final documentation, and either party is authorized to submit it to the court to be so-ordered. (Id., Exh. B).Unable to secure the $21 million, defendants, represented by plaintiff, sought to renegotiate the terms of the settlement, offering $14.3 million in cash and an assignment of $6.7 million in loans due defendant ACG II. SageCrest rejected defendants' offer and sought by motion to have the court so-order the short-form agreement. (NYSCEF 157, Exh. C). In response, defendants sought, also by motion, to have the proposed assignment treated as the "cash equivalent" of the $6.7 million. They attached to their motion an affidavit from Peck asserting his repeated and unsuccessful efforts to assure SageCrest that the loans would be paid. (Id., Exh. D). "

"At an EBT held on June 27, 2011, Peck testified that he recalled questioning Newman on May 18 as to whether the agreement protected him personally, and that Newman responded that the pledged loans were the sole security for the assignment, along with the "credit enhancement
of my limited personal guarantee," and that this limitation of liability was the "beauty of the settlement." (NYSCEF 168). Although Peck conceded that he had no reason to believe that SageCrest had agreed to the sole recourse provision, he nonetheless maintained that he thought
that the sole recourse provision was included in the final agreement. (NYSCEF 168).At an EBT held on June 27, 2011, Peck testified that he recalled questioning Newman on May 18 as to whether the agreement protected him personally, and that Newman responded that the pledged loans were the sole security for the assignment, along with the "credit enhancement of my limited personal guarantee," and that this limitation of liability was the "beauty of the settlement." (NYSCEF 168). Although Peck conceded that he had no reason to believe that SageCrest had agreed to the sole recourse provision, he nonetheless maintained that he thought that the sole recourse provision was included in the final agreement. (NYSCEF 168)."

"Plaintiff has thus established, primafacie, that it did not breach the standard of professional care and that its actions were not the proximate cause of the 2009 action. (See Engelke v Brown Rudnick Berlack Israels LLP, _ NYS2d _, 2013 NY Slip Op 07419 [1st Dept 2013] [plaintiff could not show with sufficient certainty that, absent alleged malpractice, he would have been able to avert defending second lawsuit]; Natural Organics Inc. v Anderson Kill & Glick, P.C., 67 AD3d 541, 542 [1st Dept 2009], Iv dismissed 14 NY3d 881 [2010] [plaintiff failed to demonstrate causal connection between alleged malpractice and injuries]; Cohen v Weitzner, 47 AD3d 594, 595 [1st Dept 2008] [typographical error on defendant attorneys'  spreadsheet not proximate cause of plaintiffs' injury]; Leder v Speigel, 31 AD3d 266, 268 [1st Dept 2006], affd 9 NY3d 836 [2007], cert denied 552 US 1257 [2008] [plaintiffs malpractice claim based on unsupported, conclusory assertion that defendant's alleged erroneous advice proximately caused injury]; Merz v Seaman, 265 AD2d 385, 389 [2d Dept 1999] [defendant attorneys who allegedly negligently drafted contract not liable for failing to warn banker-client about repercussions of personal guarantee]; Levine v Lacher & Lovell-Taylor, 256 AD2d 147 [1st Dept 1998] [plaintiffs disposition of collateral in disregard of court order was sole proximate cause of his injury; that alleged negligent drafting of loan agreement contributed to injury ..."

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Still May Be Responsible For Some of the Damage

Supreme Court and the Appellate Division sometimes are able to perform surgery on a complaint, allowing provable claims and damages to remain in play while the balance is excised.  Such is the case in Morad Assoc., LLC v Lee   2013 NY Slip Op 08204   Decided on December 10, 2013
Appellate Division, First Department.   
 

We deduce that defendant attorney represented a landlord, and that a tenant was illegally evicted, and when evicted, his property was destroyed.  Both Justice Edmead and the AD found that the attorneys might be liable for the illegal eviction, but the AD conclusively held that attorneys were not responsible for the destruction.

"The evidence submitted by defendant attorney, while showing that he may not be liable for a large measure of the damages assessed against plaintiff, failed to establish as a matter of law that his alleged negligence was not the cause of at least some of those damages. In addition to the damage to the property of plaintiff's tenant, plaintiff was also assessed damages for wrongful eviction for which defendant may be held liable. We find no basis for holding defendant liable for any damages plaintiff incurred when its agents destroyed the tenant's property. "

 

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Legal Malpractice in the Electronic Era

Wherever attorneys do their work the question of legal malpractice may arise. In today's New York Law Journal, Joel Cohen and James Bernard present an excellent compilation of potential legal malpractice issues in the ESI area.  Investigation of electronically stored information has become a central issue in litigation since the Zabulake v. USB Warburg decision.  As the country becomes more involved in social media, further sophistication is required.  Even the question of when an attorney may use public Wi-Fi is discussed.   From the article "The 'Ethic' of Getting up to Speed 'Technologically' by Cohen and Bernard:

"When things end up poorly in a case, whether the client deserved to win or not, the client may decide to come after his criminal lawyer claiming malpractice, either in a civil action or in a post-conviction proceeding claiming "ineffectiveness." He may argue that the lawyer 1) didn't explain all of the litigating options to me; or 2) was "ineffective" in investigating the case, or in cross-examining key witnesses; or 3) did not let me, or mistakenly encouraged me to, take the witness stand in my own defense.

Examples may range from a lawyer's failure to obtain text messages (we all know about emails), to a failure to obtain posts on a Facebook page, to a more common failure to adequately preserve electronic materials. Which disgruntled client, particularly one sitting in a jail cell, wouldn't use the judge's remarks to try to nail to the wall his now or soon-to-be-terminated lawyer for malpractice or—maybe, worse for his reputation at the bar—by claiming "ineffective assistance of counsel" in a post-conviction appeal or collateral attack on his conviction? For in such a lawsuit, appeal or collateral attack he will "name [his lawyer's] name" as ineffectually having tried the case by tying his own arm behind his back against—perhaps a younger—prosecutor more in tune with modern Internet technology.

The origins of the modern technological revolution in the art of lawyering can probably trace itself back to a number of milestones: the first Westlaw/Lexis terminals, the advent of the Internet and, on the judicial front, Judge Shira A. Scheindlin's decisions in the seminal Zubulake case. Whether you believe that the decisions opened up a Pandora's box of litigation costs and burdens for defendants, or whether you believe they gave plaintiffs access to critical evidence which would have otherwise been destroyed, there is no question that Zubulake changed the way litigators think about and prepare cases. It also required us to learn more about technology issues. As Scheindlin wrote in Zubulake V: "[C]ounsel must become fully familiar with her client's document retention policies, as well as the client's data retention architecture. This will invariably involve speaking with information technology personnel and the actual (as opposed to theoretical) implementation of the firm's recycling policy."1 In other words, counsel had to get tech savvy.

And it is worth asking, if a lawyer fails to "get smart," what are the consequences? Of course, there are the potential sanctions that might be available to the aggrieved party. But can, after this new Comment 8, a lawyer face an ethics charge for this sort of lapse in knowledge? It is quite possible that it could be the basis for a malpractice claim if the failure to discuss these issues with a client resulted in a serious enough sanction, such as dismissal of a claim or defense.

Given all of the resources which have been devoted to educating the bar about the need to preserve electronic information, emails, documents, etc., it is not too hard to imagine a client claiming that the failure to do so in this day and age amounts to malpractice, even though that would not have been the case however many years ago. In the criminal context, could it rise to the level of ineffective assistance of counsel resulting in a possible conviction reversal? Not too many years ago, the U.S. Supreme Court held that a lawyer provided ineffective assistance of counsel when the lawyer failed to tell a client about the likelihood of deportation if a client pleaded guilty to drug distribution charges.2

There are obvious differences between working with a client on e-discovery issues and informing a client of the legal consequences of pleading guilty to a felony, but it is not impossible to imagine a scenario in which the failure to learn about a client's technological infrastructure is egregious enough and results in a serious enough sanction so as to bring the attorney's behavior within the realm of a constitutional claim of ineffectiveness. After all, constitutional ineffectiveness under Strickland is triggered when counsel's conduct falls "below an objective standard of reasonableness."3 What is "reasonable" in terms of what counsel is expected to know about e-discovery is rapidly changing, and only in the direction of requiring greater knowledge."
 

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Law Firm Strikes Out Twice in One Case

It seems that Lacher & Lovell-Taylor PC were attorneys working for Lloyd's of London.  They ran into disputes with the carrier, and in this New York county case, not only had to pay back monies, but were also found not to be covered for a malpractice case.  Here the AD determines that a demand for the return of legal fees paid to a law firm is not "legal malpractice."

Certain Underwriters at Lloyd's London Subscribing to Policy No. SYN-1000263 v Lacher & Lovell-Taylor, P.C.   2013 NY Slip Op 08112   Decided on December 5, 2013   Appellate Division, First Department 
"Order, Supreme Court, New York County (Anil C. Singh, J.), entered March 26, 2012, which granted plaintiff's motion for summary judgment declaring that it was not obligated to defend or indemnify defendants in the underlying estate proceeding, and on its cause of action for reimbursement of its defense costs, and order, same court and Justice, entered October 9, 2012, which, to the extent appealable, granted plaintiff's motion to modify the order to include summary judgment on its supplemental complaint, and order and judgment (one paper), same court and Justice, entered March 13, 2013, awarding plaintiff the total sum of $166,968.90 in defense costs from defendants, unanimously affirmed, with costs.

A claim for the return of legal fees is not a claim for "damages" in a legal malpractice action, as defined in the professional liability policy issued by plaintiff to defendants (see Shapiro v OneBeacon Ins. Co., 34 AD3d 259, 260 [1st Dept 2006], lv denied 9 NY3d 803 [2007]). In support of each of the causes of action, the complaint alleges only that defendants overbilled their client in the underlying estate proceeding; it does not allege facts tending to show that but for their negligence, they could have achieved a better result for him (see Allstate Ins. Co. v Mugavero, 79 NY2d 153, 162-163 [1992]; Barbara King Family Trust v Voluto Ventures LLC, 46 AD3d 423 [1st Dept 2007]). Moreover, plaintiff reserved its right to seek reimbursement of its defense costs in the event of a finding of no coverage (see American Guar. & Liab. Ins. Co. v CNA Reins. Co., 16 AD3d 154 [1st Dept 2005]). "

 

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It Takes Pro-Se Litigants to Change the Law of Legal Malpractice

Legal Malpractice, we often think, is a body of law, written by lawyers, concerning lawyers, judged by lawyers and results in decisions concerning solely lawyers.  However, sometimes this is simply not true.  Venecia V. v August V.  2013 NY Slip Op 08140  Decided on December 5, 2013 Appellate Division, First Department  Saxe, J., J.  is one such example. 
 

Pro-se Husband and pro-se wife are engaged in divorce and custody dispute, and huge  legal malpractice law changes follow.  "This appeal, arising in the context of a contentious post-divorce dispute, raises a variety of challenges to the court's determinations involving custody, visitation and expenses. While the bulk of these issues may be briefly addressed seriatim, we must address at greater length the unresolved question of whether parents who are directed to pay the fees of the attorney appointed to represent the children may raise the defense of legal malpractice to that attorney's claim for fees. Determination of this issue requires us to decide whether, as defendant father claims, Mars v Mars (19 AD3d 195 [1st Dept 2005], lv dismissed 6 NY3d 821 [2006]) gives him legal standing to assert the legal malpractice defense.

In Mars v Mars (19 AD3d at 196), this Court held that a parent may assert legal malpractice as an affirmative defense to a Law Guardian's fee application "to the extent of challenging that portion of the fees attributable to advocacy, as opposed to guardianship." Our ruling was limited by the then-prevailing view that attorneys appointed as law guardians for children in divorce cases often functioned in a role similar to a guardian ad litem, advocating for [*3]what they believed to be the best interests of the child, as opposed to what the child desired. Accepting the rule of Bluntt v O'Connor (291 AD2d 106 [4th Dept 2002], lv denied 98 NY2d 605 [2002]), which held that absent special circumstances, a parent in a visitation dispute lacks standing to bring a legal malpractice claim against a child's court-appointed law guardian, we limited our ruling to the portion of the law guardian's fee representing the work that consisted of advocacy rather than guardianship.

 

Accordingly, after 2007, the distinction made by our ruling in Mars is no longer necessary in cases such as this; where the child is capable of decision-making, the task of the attorney for the child is generally solely advocacy, rather than guardianship, as long as the child is capable of knowing, voluntary and considered judgment. The portion of the Mars decision allowing a parent to raise malpractice as a defense to a fee application for that portion of the fee earned by advocacy has become applicable to the attorney's entire fee claim. Rule 7.2 does not in any way vitiate the Mars ruling; on the contrary, it renders it more generally applicable.

We reaffirm the essence of the Mars v Mars ruling, namely that a parent may assert legal malpractice as an affirmative defense to the fee claim of an attorney for a child. The attorney for the child, no less than the attorneys for the parties, is serving as a professional and must be equally accountable to professional standards. That the children cannot hire and pay for their own attorneys, leaving it to the court to make the necessary appointment, does not alter the applicable standards, or the means by which they may be raised.

The attorney for the children protests that if this type of defense is allowed generally, parents dissatisfied with the results of their custody claims will use malpractice challenges to avoid paying, resulting in a proliferation of applications for enforcement of ordered fees. She also suggests that the threat of malpractice claims from disgruntled parents will have a negative impact on the effectiveness of attorneys for children, by giving those parents control over the representation of their children.

We disagree. The possibility that a parent who feels aggrieved over the developments in a custody or visitation dispute may claim malpractice as a means of avoiding payment of the attorney's fee does not warrant granting these attorneys complete immunity against the defense of [*4]legal malpractice. "

 

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It Takes Pro-Se Litigants to Change the Law of Legal Malpractice

Legal Malpractice, we often think, is a body of law, written by lawyers, concerning lawyers, judged by lawyers and results in decisions concerning solely lawyers.  However, sometimes this is simply not true.  Venecia V. v August V.  2013 NY Slip Op 08140  Decided on December 5, 2013 Appellate Division, First Department  Saxe, J., J.  is one such example. 
 

Pro-se Husband and pro-se wife are engaged in divorce and custody dispute, and huge  legal malpractice law changes follow.  "This appeal, arising in the context of a contentious post-divorce dispute, raises a variety of challenges to the court's determinations involving custody, visitation and expenses. While the bulk of these issues may be briefly addressed seriatim, we must address at greater length the unresolved question of whether parents who are directed to pay the fees of the attorney appointed to represent the children may raise the defense of legal malpractice to that attorney's claim for fees. Determination of this issue requires us to decide whether, as defendant father claims, Mars v Mars (19 AD3d 195 [1st Dept 2005], lv dismissed 6 NY3d 821 [2006]) gives him legal standing to assert the legal malpractice defense.

In Mars v Mars (19 AD3d at 196), this Court held that a parent may assert legal malpractice as an affirmative defense to a Law Guardian's fee application "to the extent of challenging that portion of the fees attributable to advocacy, as opposed to guardianship." Our ruling was limited by the then-prevailing view that attorneys appointed as law guardians for children in divorce cases often functioned in a role similar to a guardian ad litem, advocating for [*3]what they believed to be the best interests of the child, as opposed to what the child desired. Accepting the rule of Bluntt v O'Connor (291 AD2d 106 [4th Dept 2002], lv denied 98 NY2d 605 [2002]), which held that absent special circumstances, a parent in a visitation dispute lacks standing to bring a legal malpractice claim against a child's court-appointed law guardian, we limited our ruling to the portion of the law guardian's fee representing the work that consisted of advocacy rather than guardianship.

 

Accordingly, after 2007, the distinction made by our ruling in Mars is no longer necessary in cases such as this; where the child is capable of decision-making, the task of the attorney for the child is generally solely advocacy, rather than guardianship, as long as the child is capable of knowing, voluntary and considered judgment. The portion of the Mars decision allowing a parent to raise malpractice as a defense to a fee application for that portion of the fee earned by advocacy has become applicable to the attorney's entire fee claim. Rule 7.2 does not in any way vitiate the Mars ruling; on the contrary, it renders it more generally applicable.

We reaffirm the essence of the Mars v Mars ruling, namely that a parent may assert legal malpractice as an affirmative defense to the fee claim of an attorney for a child. The attorney for the child, no less than the attorneys for the parties, is serving as a professional and must be equally accountable to professional standards. That the children cannot hire and pay for their own attorneys, leaving it to the court to make the necessary appointment, does not alter the applicable standards, or the means by which they may be raised.

The attorney for the children protests that if this type of defense is allowed generally, parents dissatisfied with the results of their custody claims will use malpractice challenges to avoid paying, resulting in a proliferation of applications for enforcement of ordered fees. She also suggests that the threat of malpractice claims from disgruntled parents will have a negative impact on the effectiveness of attorneys for children, by giving those parents control over the representation of their children.

We disagree. The possibility that a parent who feels aggrieved over the developments in a custody or visitation dispute may claim malpractice as a means of avoiding payment of the attorney's fee does not warrant granting these attorneys complete immunity against the defense of [*4]legal malpractice. "

 

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Standing and Documents in Legal Malpractice

Small closely held corporations abound in New York, and they present a special issue for the principal of standing in legal malpractice.  Who actually hired the attorney...was it the president / owner / sole shareholder, or was it the corporate entity.  While the law is clear, Rodolico v Rubin & Licatesi, P.C. 2013 NY Slip Op 08068  Decided on December 4, 2013  Appellate Division, Second Department  shows us a third way the case can be resolved.  Note the lack of "documents" in defendant's attack on the complaint.
 

"The plaintiff's daughter worked for the defendant law firm, in which the individual defendants are partners. During her employment, the plaintiff came to learn of an investment opportunity being organized by the defendants, which involved providing high interest, short-term loans for the development of real estate. The plaintiff and his wife, Joanne Rodolico, decided to participate. Several bank checks were purchased by Joanne and a corporation owned by the plaintiff and Joanne, C & R Door and Frame Corporation (hereinafter C & R), and forwarded to the defendants for the purpose of making loans. When five of the loans were not repaid in full, the plaintiff commenced this action seeking to recover from the defendants the money that he was owed, claiming that the defendants effectively borrowed the money from him. Alternatively, the plaintiff sought damages for legal malpractice. The plaintiff made a pre-discovery motion for summary judgment on the complaint, which motion is not the subject of this appeal, and the defendants cross-moved to dismiss the complaint pursuant to CPLR 3211(a)(1) and (3), for lack of standing and based upon documentary evidence. The Supreme Court denied the motion and cross motion, and also directed that Joanne and C & R be joined as plaintiffs in the action.

In support of that branch of their cross motion which was to dismiss the complaint [*2]for lack of standing, the defendants argued that the plaintiff had no interest in the loaned funds because two of the loans, for which the plaintiff sought recovery in the second and fourth causes of action, were funded by C & R, and three of the loans, for which the plaintiff sought recovery in the first, third, and fifth causes of action, were funded by Joanne. The plaintiff does not deny that the funds for two of the loans were provided by C & R, but merely asserts that he and Joanne own C & R. However, "[f]or a wrong against a corporation a shareholder has no individual cause of action, though he loses the value of his investment" (Abrams v Donati, 66 NY2d 951, 953; see Citibank v Plapinger, 66 NY2d 90, 93 n; Elenson v Wax, 215 AD2d 429; General Motors Acceptance Corp. v Kalkstein, 101 AD2d 102, 106). Here, the plaintiff's action was brought in his own name, and there is nothing in the complaint to indicate that the plaintiff brought this action in a derivative capacity, on behalf of C & R. Accordingly, since the plaintiff does not have standing, individually, to seek the return of funds purportedly borrowed from C & R by the defendants, the second and fourth causes of action should have been dismissed insofar as they were asserted by the plaintiff in his individual capacity.

The same is not true, however, of the first, third, and fifth causes of action, which sought the return of funds that the defendants allege were provided by Joanne. The plaintiff and Joanne averred that, although Joanne went to the bank to purchase the bank checks, they do not keep their finances separate, and the funds belonged to both of them. The defendants presented no evidence to the contrary. The plaintiff, therefore, had standing to seek the return of the funds (see generally Wells Fargo Bank Minn., N.A. v Mastropaolo, 42 AD3d 239, 242), and the Supreme Court properly denied the branch of the defendants' motion which sought dismissal of the first, third, and fifth causes of action for lack of standing.

The Supreme Court also properly denied the branch of the defendants' motion which was to dismiss the sixth cause of action, alleging legal malpractice, pursuant to CPLR 3211(a)(1). The evidence submitted in support of a motion pursuant to CPLR 3211(a)(1) to dismiss a complaint on the ground that a defense is founded on documentary evidence "must be documentary' or the motion must be denied" (Cives Corp. v George A. Fuller Co., Inc., 97 AD3d 713, 714, quoting Fontanetta v John Doe 1, 73 AD3d 78, 84 [internal quotation marks omitted]). " [N]either affidavits, deposition testimony, nor letters are considered documentary evidence within the intendment of CPLR 3211(a)(1)'" (Cives Corp. v George A. Fuller Co., Inc., 97 AD3d at 714, quoting Granada Condominium III Assn., 78 AD3d 966, 997; see Suchmacher v Manana Grocery, 73 AD3d 1017; Fontanetta v John Doe 1, 73 AD3d at 86).

Here, the only evidence submitted by the defendants that pertained to the legal malpractice cause of action were affidavits. Accordingly, since the defendants failed to support the branch of their motion seeking to dismiss the legal malpractice cause of action pursuant to CPLR 3211(a)(1) with "documentary" evidence, it was properly denied (see Cives Corp. v George A. Fuller Co., Inc., 97 AD3d at 714; Integrated Constr. Servs., Inc. v Scottsdale Ins. Co., 82 AD3d 1160, 1163; Fontanetta v John Doe 1, 73 AD3d at 86). "

 

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Finding the Departure is Easy...It's the Rest that is Hard in Legal Malpractice

Battling over the "but for" portion of the legal malpractice requirements is generally where commercial cases such as Garten v Shearman & Sterling LLP 2013 NY Slip Op 00035
Appellate Division, First Department end up. Here, in a surprisingly clear recitation, the AD tells us why this case was doomed.
 

"On an appeal from a denial of a dismissal motion, this Court found that plaintiff "has stated a cause of action for malpractice by alleging that but for' defendant's failure to prepare and procure documents necessary to provide him with a first-priority security interest, he would have been able to recover the amounts owed to him by the defaulting borrower" (52 AD3d 207 [1st Dept 2008]).

Now, after discovery, it is clear that plaintiff cannot establish either a breach of duty or causation, both of which are necessary to proceed with the claim (see Wo Yee Hing Realty Corp v Stern, 99 AD3d 58, 62-63 [1st Dept 2012]).

Plaintiff's own deposition testimony establishes that he understood that at the time he was advancing a loan to Pacific Jet, there was a superior lien on the accounts receivable, which were also being used to collateralize his loan. He knew the identity of the senior creditor and fully understood that his position would be junior when his loan was first made and would remain so, unless and until the first lien was paid off. He was, however, under a mistaken impression about the amounts owed to the senior creditors because his friend, Tim Prero, Pacific Jet's principal, misled him by significantly understating those amounts. Plaintiff's assumptions about his business risk in getting repaid were based upon false factual information about the financial health of Pacific Jet and how quickly the senior creditors would be paid off. Defendant established a prima facie case warranting dismissal of the complaint by showing that plaintiff's losses were caused by Pacific Jet's poor financial condition and plaintiff's misjudgment of risk based upon the false factual information provided to him by Prero. (see A & R Kalimian v Berger, Gorin & Leuzzi, 307 AD2d 813 [1st Dept 2003]).

Plaintiff failed to raise any factual disputes in opposition. There is no evidence that defendant was retained to review Pacific Jet's private corporate records. The undisputed evidence reveals that plaintiff alone reviewed Pacific Jet's private financial records and negotiated the material terms of the transaction. The public UCC records, which defendant searched, revealed a prior security interest, a fact known to all, but no lien amount was recorded. [*2]Although plaintiff asked defendant to "document" his first priority interest, he did not have a first priority interest at the time he advanced the loan and had no expectation of a first priority interest before the senior creditor was paid. Subordination agreements or releases from the senior creditor at the time the loan was made, therefore, were not in order. Plaintiff has not elucidated what other documents defendant could have procured or prepared that would have altered the outcome of what was in hindsight a bad business deal.

Plaintiff no longer claims that defendant could have taken actions that would have allowed him to recover the amounts owed. He currently argues that he would not have entered into the transaction had he known his friend was misleading him about the amounts owed to prior creditors. This position is different from the position he prevailed upon on the motion to dismiss. It is also contrary to his deposition testimony, when in answer to a direct question about whether he considered not making any loans because his friend had failed to show him any documentation, plaintiff could not "speak to his mindset" at the time. Plaintiff's new claim does not create an issue of fact that would defeat summary judgment (see Madtes v Bovis Lend Lease LMB, Inc., 54 AD3d 630 [1st Dept 2008]). Finally, the undisputed evidence reveals that plaintiff was aware that there were risks associated with having a junior security position at the time he advanced the loan proceeds and negotiated his own remedy of enhanced interest. "
 

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Legal Malpractice and the Statute of Limitations

Sometimes events take place long after the attorney - client relationship has ended.  There are two arguments over whether the statute of limitations has run.  One is that the statute commences when the mistake is made and might be tolled by the continuous representation doctrine.  The other is that  the statute cannot commence to run until all the elements of a case exist, including damage.  Plaintiff loses either way in Adeli v Ballon Stoll Bader & Nadler, P.C.  2013 NY Slip Op 32993(U)  November 22, 2013  Sup Ct, NY County  Docket Number: 154685/12  Judge: Saliann Scarpulla.

"Adeli commenced this action in or about July 2012. In her complaint, Adeli alleged that on or about December 17, 2003, Richard Sachs, an investor in her company and holder of a defaulted loan which Adeli had personally guaranteed, sued both Adeli and her company for breach of personal guarantee and fraud ("Sachs action"). In or about early 2004, Adeli retained BSBN to represent her in the Sachs action, and in or about April 2005, the First Department granted Sachs judgment against Adeli. 

BSBN sought an interim stay while it appealed the First Department's decision. Adeli alleged that BSBN advised her that Sachs' lawyers would not abide by a stay, and would nevertheless, seek to enforce the judgment against her. According to Adeli, BSBN then advised her to move her assets to friends of hers to protect them from judgment; Adeli transferred her assets in or about early summer of2005, and subsequently filed for bankruptcy in or about early September 2005. The bankruptcy court granted her bankruptcy discharge on or about March 27, 2008, but, based on her transfer of assets in 2005, the Bankruptcy Panel of the Ninth Circuit Court of Appeals reversed that
bankruptcy discharge on or about March 24, 2009.

Adeli asserted a legal malpractice claim, alleging that because she followed BSBN's advice and transferred her assets to her friends, she was denied a bankruptcy discharge and suffered monetary damages. BSBN now moves to dismiss the complaint. First, BSBN argues that the action should be dismissed because Adeli lacks legal capacity to bring suit. Second, BSBN
argues that the action should be dismissed because it was commenced beyond the applicable statute of limitations. Finally, BSBN argues that the action should be dismissed because Adeli's complaint fails to establish the damages element for legal malpractice. In support of its motion, BSBN provides a court document relieving BSBN as attorney for Adeli's company in 2006. BSBN also submits two affidavits from BSBN attorneys stating that the relationship between BSBN and Adeli ended in 2005.

Here, Adeli's legal malpractice claim accrued in or about April 2005 when BSBN allegedly told her to transfer her assets so that they would be protected from judgment in the Sachs matter, and thus the statute of limitations for this claim expired in or about April 2008.


Contrary to Adeli's assertions, the continuous representation doctrine does not apply here because her attorney-client relationship with BSBN ended in 2005. Her allegations of malpractice are predicated upon BSBN's advice in the Sachs matter, and are unrelated to the bankruptcy proceeding, thus it cannot be said that BSBN continued to represent her after 2005. Even if the continuous representation doctrine did apply, it only tolled the statute of limitations until March 24, 2009, when the Ninth Circuit reversed the bankruptcy court's decision and denied Adeli her bankruptcy discharge. Therefore, at the latest, the statute of limitations expired on March 24, 2012, months before Adeli filed this action in July 2012."

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How Could Two Parties So Disagree On The Facts?

In this legal malpractice case which was dismissed and then affirmed on appeal, the decision reveals so wide a difference in analysis of the corporate and loan documents that it is astonishing.  In Manus v Flamm   2013 NY Slip Op 07683   Decided on November 19, 2013   Appellate Division, First Department plaintiff presents a claim that is not merely a shade different from that of defendant, it is night and day.
 

"The complaint alleges that defendant committed legal malpractice while representing plaintiff in a replevin action brought against her in October 1998 by nonparty Family M. Foundation, Ltd., a Cayman Islands corporation formed by the late Allen Manus, plaintiff's former husband.

The first cause of action, which alleges that defendant was negligent in failing to assert certain defenses or move to dismiss the complaint in the replevin action, is belied by the seventh and eighth affirmative defenses, which assert that the loan agreement imposed no personal liability on plaintiff.

The second cause of action alleges that plaintiff "felt compelled" to sign the stipulation of settlement in the replevin action, which converted a $1,000,000 obligation from the corporation to her into a $400,000 obligation from her to the corporation. However, plaintiff's obligation arose in the context of the loan agreement she executed, not the stipulation of settlement. The stipulation did not impose personal liability on plaintiff for the debt created under the loan agreement; it merely directed that her shares in her cooperative apartment be substituted for her jewelry as collateral for the loan.

The third cause of action alleges that, but for defendant's insistence that the corporation's president and sole director, Elizabeth (Libby) Manus, had to execute the corporation's release of plaintiff's obligations to it and that Allen Manus's execution of the release would not be sufficient, Allen Manus would have signed the release and plaintiff would have been free of her obligations under the stipulation. However, this Court has found that the action by the corporation to enforce the stipulation upon plaintiff's default was properly maintained under Libby Manus's authority (see Family M. Found. Ltd. v Manus, 71 AD3d 598 [1st Dept 2010], lv dismissed 15 NY3d 819 [2010]). Even assuming that Allen Manus, who held a power of [*2]attorney for the corporation, was authorized to release plaintiff's obligations to the corporation, Libby Manus's refusal to sign the release would have revoked his authority (see Zaubler v Picone, 100 AD2d 620, 621 [2d Dept 1984]). "

 

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Statute of Limitations in Legal Malpractice

We're proud and pleased that the New York Law Journal published "Statute of Limitations in Legal Malpractice" today.  From the article:

"
The statute of limitations sets the maximum time during which an action for damages may be commenced. It is of ancient heritage. Its first appearance in Anglo-American law is as early as 1237. In New York the statute of limitations applies to all actions in law and in equity. CPLR Article 2 sets time limitations in every enumerated action or special proceeding. However, not all actions are specifically enumerated. Those which are not enumerated are subject to a six-year statute pursuant to CPLR 213. In general, separate treatment is afforded to commencement of actions based upon contract (CPLR 213) and tort (CPLR 214(6)).


Legal malpractice is different. It is often described as both a tort and a breach of retainer contract. Shumsky v. Eisenstein, 96 NY2d 164 (2001). Whether it is a "tort" or a "contract" is generally decided by the nature of the damages sought, Sears Roebuck & Co. v. Enco Assocs., 43 NY2d 389 (1977); Santulli v. Englert, 78 NY2d 700 (1992). Tort damages are those which compensate a plaintiff for all of the "reasonably foreseeable injury suffered." PJI 2:277. Contract damages are to "indemnify plaintiff for the gains prevented and the losses sustained by the breach of the retainer contract." PJI 4:20.

Initially different periods of limitation were applied to legal malpractice claims in tort and in contract, Santulli, supra. In reaction to Santulli, the Legislature shortened the statute of limitations to three years for breach of contract claims in 1996. Now, legal malpractice is enumerated in Article 2 and is subject solely to a three-year statute of limitations under CPLR 214[6] no matter how the claim is denominated. This three-year statute is applicable whether the claim is called tort or contract, and applies all other descriptions. Whether it is "fraud," "breach of fiduciary duty," or any other claim, should the allegations arise from professional representation of the client by the attorney it is subject to a three-year statute, Ulico Cas. v. Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d 1 (1st Dept. 2008); Melendez v. Bernstein, 29 AD3d 872 (2d Dept. 2006).

Calculating the onset and length of the legal malpractice statute of limitations is enormously complex. To begin, it is not always clear when the clock starts to run. Several considerations govern that calculation. These include the date of the mistake, whether that mistake immediately causes problems, continuing representation, and the maturing of an actionable injury, To further complicate the analysis there is equitable tolling and equitable estoppel."

 

Read more: http://www.newyorklawjournal.com/PubArticleNY.jsp?id=1202629531207&Statute_of_Limitations_in_Legal_Malpractice#ixzz2lkqm76Up

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Legal Malpractice Island or Archepelago ?

Here is a textbook example of how the statute of limitations in legal malpractice is stretched to the extreme, yet plaintiff loses.  In 2003 defendants wrote an opinion letter which was contrary to the IRS determination which came in 2007.  Attorneys (or related attorneys) were retained in 2007 to fight the IRS and lost in 2011.  5 months later plaintiff sued.  Timely or too late? 

Landow v Snow Becker Krauss, P.C.   2013 NY Slip Op 07710   Decided on November 20, 2013
Appellate Division, Second Department   holds that they were too late, and for the reason that more than 3 years went by between the engagements in 2003 and 2007. Legal Malpractice continuing representation requires that there be no 3 year period between the islands of representation.  Hence, continuous representation does not permit the archipelago theory of strung out islands of representation with more than 3 years of ocean between them.
 

""On a motion to dismiss a complaint pursuant to CPLR 3211(a)(5) on statute of limitations grounds, the moving defendant must establish, prima facie, that the time in which to [*2]commence the action has expired" (Zaborowski v Local 74, Serv. Empls. Intl. Union, AFL-CIO, 91 AD3d 768, 768-769). In a legal malpractice action, the statute of limitations is three years (see CPLR 214[6]). "A legal malpractice claim accrues when all the facts necessary to the cause of action have occurred and an injured party can obtain relief in court'" (McCoy v Feinman, 99 NY2d 295, 301, quoting Ackerman v Price Waterhouse, 84 NY2d 535, 541). Here, the defendants met their prima facie burden by establishing that the cause of action alleging legal malpractice accrued on March 5, 2003, the date they allegedly issued the opinion letter advising the plaintiff that the proposed sale would not result in the loss of his tax deferment status (see Ackerman v Price Waterhouse, 84 NY2d at 541-543; Byron Chem. Co., Inc. v Groman, 61 AD3d 909). Although the plaintiff did not discover that his attorneys' alleged advice was incorrect until years later, " [w]hat is important is when the malpractice was committed, not when the client discovered it'" (McCoy v Feinman, 99 NY2d at 301, quoting Shumsky v Eisenstein, 96 NY2d 164, 166). Therefore, since the defendants demonstrated that the plaintiff did not commence this action until December 29, 2011, more than three years after his claim for legal malpractice accrued, the defendants established, prima facie, that the claim was time-barred.

Upon that showing, the burden then shifted to the plaintiff to raise a question of fact as to whether he actually commenced the action within three years after the legal malpractice cause of action accrued, the statute of limitations was tolled, or the statute of limitations relied on by the defendants was otherwise inapplicable (see Zaborowski v Local 74, Serv. Empls. Intl. Union, AFL-CIO, 91 AD3d at 769). The plaintiff, in opposition to the defendants' showing, relies on the continuous representation doctrine as a toll of the three-year statute of limitations; however, he failed to raise a question of fact in this regard. As evidenced by, inter alia, the more than four-year period of time between the issuance of the opinion letter and the plaintiff's alleged retention of the defendants in July 2007, during which no further legal representation was undertaken with respect to the subject matter of the opinion letter, the parties did not contemplate that any further representation was needed (see McCoy v Feinman, 99 NY2d at 306; Byron Chem. Co., Inc. v Groman, 61 AD3d at 911).

Accordingly, the Supreme Court properly granted those branches of the defendants' respective motions which were pursuant to CPLR 3211(a)(5) to dismiss, as time-barred, the cause of action alleging legal malpractice. "

 

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Comparative Fault in Legal Malpractice

A win at trial and a loss on Appeal in this legal malpractice case was based upon Plaintiff's potential comparative fault.  Hattem v Smith    2013 NY Slip Op 07791  Decided on November 21, 2013  Appellate Division, Third Department is the story of a fairly straight-forward sale of a business coupled with the failure to file liens and UCC-1s.  Seller was found by the 3d Department to be sophisticated enough to potentially share in some of the blame.

"In September 2007, plaintiff commenced this legal malpractice action. Following a trial, the jury was asked whether Smith was negligent in failing to file a UCC-1 prior to NBT's filing, and in failing to file DMV liens. The jury answered both questions in the affirmative and awarded damages to plaintiff. Supreme Court denied defendants' cross motion to set aside the verdict, and judgment was entered thereon. Defendants appeal from the order denying the cross motion and from the judgment.

We agree with defendants' contention that Supreme Court erred in refusing to charge the jury regarding plaintiff's comparative fault. The culpable conduct of a plaintiff client may be asserted as an affirmative defense in a legal malpractice action in mitigation of damages (see CPLR 1411, 1412; Schaeffer v Lipton, 243 AD2d 969, 971 [1997]; Caiati v Kimel Funding Corp., 154 AD2d 639, 639-640 [1989]; see also Shapiro v Butler, 273 AD2d 657, 658 [2000]). Here, the evidence was sufficient to support a finding that plaintiff could reasonably have been expected to understand the underlying obligations and formalities (compare Cicorelli v Capobianco, 90 AD2d 524, 524 [1982], affd 59 NY2d 626 [1983]). Plaintiff was experienced in commercial transactions, including secured loans, understood that loans such as the one from NBT to OSC generally require collateral, and testified that his purpose in retaining Smith was to protect his security interest in the vehicles and equipment. He acknowledged that none of the discussions among the parties and their counsel leading up to the execution of the sale documents had included any mention of outside loans to OSC, and that he introduced OSC's owners to the NBT officer who later approved the loan.

Plaintiff's testimony as to his purpose in making this introduction and his personal knowledge regarding the owners' intention to obtain financing for the purchase of JMF was contradictory and inconsistent. The loan officer testified that plaintiff introduced OSC's owners to him for this specific purpose, and one of the owners testified that their plan to obtain a loan was discussed with plaintiff before the sale documents were signed; both the owner and the loan officer testified that plaintiff was present during transactions pertaining to the loan. Plaintiff never advised Smith that he had signed the sale documents, nor did he contact Smith after engaging in these transactions. As this evidence provided "a valid line of reasoning and permissible inferences from which rational people can draw a conclusion of negligence," the [*3]question of plaintiff's comparative fault should have been submitted to the jury (Bruni v City of New York, 2 NY3d 319, 328 [2004]; see Gotoy v City of New York, 94 NY2d 812, 814 [1999]; Klingle v Versatile Corp., 199 AD2d 881, 882 [1993]). Accordingly, the matter must be remitted for a new trial.

In light of this determination, we need only briefly address defendants' remaining assertions relative to Supreme Court's denial of the cross motion to set aside the verdict. Defendants assert that it was impossible for Smith to file a UCC-1 before the date of NBT's filing, as he neither possessed the executed security agreement nor knew that it had been executed until several weeks thereafter (see UCC 9-509 [b] [1]; see generally McDaniel v 162 Columbia Hgts. Hous. Corp., 21 Misc 3d 244 [2008]). However, upon defendants' cross motion, Supreme Court analyzed the issue more broadly, and denied the cross motion upon the ground that the evidence established that the transaction could have been structured differently. This finding based upon the evidence was properly within Supreme Court's power (see CPLR 4111 [b]; Siegel, NY Prac § 399 at 696 [5th ed 2011]). Plaintiff's expert testified that plaintiff's security interest could have been protected by instructions to OSC's attorney precluding release of the sale documents, which Smith did not provide. Thus, it cannot be said that there was "simply no valid line of reasoning and permissible inferences which could possibly lead rational [people] to the conclusion reached by the jury on the basis of the evidence presented at trial" (Cohen v Hallmark Cards, 45 NY2d 493, 499 [1978]; accord Popolizio v County of Schenectady, 62 AD3d 1181, 1183 [2009]). In light of this very high standard, we further find that the evidence sufficiently established that Smith's failure to file DMV liens was the proximate cause of loss to plaintiff. Accordingly, the court did not err in denying the cross motion to set aside the verdict insofar as it addressed liability. Defendants' remaining claims need not be addressed, as they pertain to the sufficiency of proof of the quantum of damages and are thus encompassed within the issues that will necessarily be presented upon retrial. "

 

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There Can Still Be Legal Malpractice When the Client is an Attorney

OK, say you're a law firm, and the client is a Board of Managers, and the President is an Attorney.  You do work for them, and things don't go well.  You can blame the "micro-managing" President/Attorney, no?

Well, in Board of Mgrs. of Bridge Tower Place Condominium v Starr Assoc. LLP  2013 NY Slip Op 07684  Decided on November 19, 2013  Appellate Division, First Department  the answer is NO.  In fact, as rarely happens, Plaintiff obtains summary judgment on liability and dismissing the affirmative defense of comparative fault.

"This Court previously held that the stipulation drafted by defendants unambiguously stripped plaintiff of its right to amend its bylaws to attain a specific result in connection with the underlying action (see Luzzi v Bridge Tower Place Condominium, 52 AD3d 290 [1st Dept 2008]). Under those circumstances, no expert testimony was necessary to establish that defendants' conduct fell below the standards of the profession generally (see S & D Petroleum Co. v Tamsett, 144 AD2d 849, 850 [3d Dept 1988]). Because the alternative to the stipulation was not, as defendants contend, to litigate the underlying action, but for plaintiff to exercise its right to amend the bylaws immediately, the motion court did not err in finding "but for causation" as a matter of law (cf. Weil, Gotshal & Manges, LLP v Fashion Boutique of Short Hills, Inc., 10 AD3d 267, 271-272 [1st Dept 2004]).

Furthermore, although plaintiff's president is an attorney, and did see drafts of the stipulation, the record does not raise a triable issue as to whether he arrogated to himself the role of drafting the stipulation, or micro-managed the negotiation. Rather, the record shows that plaintiff relied on counsel to effect the strategy of preserving in the stipulation the right to amend the bylaws. Accordingly, the defenses of comparative fault were properly dismissed (see Mandel, Resnik & Kaiser, P.C. v E.I. Elecs., Inc., 41 AD3d 386 [1st Dept 2007]). "

 

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Due Process and Voluntary Case Settlement

Settlements including pleas to criminal charges are the linchpin of an orderly system of justice.  As any prosecutor, and indeed, any litigator knows, only a very small portion of cases can be tried to a fact finder.  if 95% of all civil cases, and a similar amount of criminal cases were not subject to disposition by voluntary settlement, the staggering numbers of cases would quickly overwhelm the entire system.

So the Court of Appeals found in People v Peque 2013 NY Slip Op 07651   Decided on November 19, 2013   Court of Appeals   Abdus-Salaam, J. for criminal cases, and so it is in matrimonial cases.  In Peque   the question of deportation and the low level of understanding may constitute lack of due process, and in legal malpractice litigation after Katebi v. Fink. 51 AD3d 424 (1st Dept, 2008).   In criminal law, "the plea represents a voluntary and intelligent choice among the alternative courses of action open to the defendant" and requires that the defendant be told of the significant consequences of a plea.  No such obligation is found in settling a matrimonial case and being asked whether the attorney's work is satisfactory. 
 It is customary in settlement of a matrimonial action to inquire of the litigants whether they are satisfied with the work of their attorneys.  When they are told (in rote fashion) to say "yes", the suffer the consequence of losing any legal malpractice rights later.  "While "[a] claim for legal malpractice is viable, despite settlement of the underlying action, if it is alleged that settlement of the action was effectively compelled by the mistakes of counsel" (Bernstein v Oppenheim & Co., 160 AD2d 428, 430 [1990]), here, the complaint is contradicted by the evidentiary material submitted on the motion to dismiss (see Guggenheimer v Ginzburg, 43 NY2d 268, 275 [1977]). Plaintiff testified that she did not wish to proceed with the trial of the matrimonial action, that she decided instead to enter into the stipulation of settlement because she wanted no further connection with her husband, that she understood that by settling the action before the completion of the trial she was foregoing the right to pursue the funds allegedly dissipated by him, and that she was satisfied with the services provided by her attorney. "

 

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It's Too Late To Do Anything But Count Up The Expenses

Plaintiff hires law firm to handle labor law case, Defendant is then hired to handle the appeal from dismissal of the case.  The appeal was dismissed for want of prosecution in 2006.  The law firm did not tell the client, and in 2008 wrote a letter telling him that the judgment was affirmed.  The legal malpractice case did not commence until 2012. 

McDonald v Edelman & Edelman, P.C.  2013 NY Slip Op 07432   Decided on November 12, 2013
Appellate Division, First Department  holds that the case was brought too late, but that an accounting of disbursements can be held.
"Defendants argue that the second cause of action, which seeks an accounting, is based on breach of fiduciary duty, in light of the attorney-client relationship, and seeks money damages, and is therefore barred by the three-year statute of limitations set forth in CPLR 214(6). They improperly raised this argument for the first time in reply on their motion (see Caribbean Direct, Inc. v Dubset LLC, 100 AD3d 510 (1st Dept 2012]). In any event, the argument is unavailing. Plaintiff's claim for an accounting so that he can recoup disbursements allegedly improperly charged against his jury award has little to do with whether defendants performed their legal services in a non-negligent manner (see Matter of R.M. Kliment & Frances Halsband, Architects [McKinsey & Co.], 3 AD3d 143 [1st Dept 2004], affd 3 NY3d 538 [2004]). It has to do with whether defendants owe plaintiff a fiduciary duty to account for money or property allegedly belonging to him, and is therefore governed by the "residual" six-year statute of limitations set forth in CPLR 213(1) (see Hartnett v New York City Tr. Auth., 86 NY2d 438, 443 [1995]; Bouley v Bouley, 19 AD3d 1049, 1051 [4th Dept 2005]).

The first cause of action, alleging legal malpractice, accrued at the time that plaintiff's appeal from the order that granted summary judgment dismissing his underlying Labor Law claims was dismissed for want of prosecution, in July 2006, notwithstanding his lack of knowledge of the dismissal (see McCoy v Feinman, 99 NY2d 295, 301 [2002]). Plaintiff then had three years to commence a malpractice action against defendants (see CPLR 214[6]), absent an applicable ground for tolling the limitations period. He did not commence this action until March 2012.

Plaintiff relies on the continuous representation doctrine. However, in June 2008, defendants sent him a letter enclosing the Second Department's affirmance of the underlying judgment and formally closing their representation of him. The letter, which plaintiff did not [*2]object to, demonstrates that the parties lacked "a mutual understanding of the need for further representation on the specific subject underlying the malpractice claim" (see Williamson v PricewaterhouseCoopers LLP, 9 NY3d 1, 9-10 [2007] [internal quotation marks omitted]). Even accepting that defendants concealed from plaintiff the fact that his appeal was dismissed as abandoned, their letter placed him on notice that his attorney-client relationship with them had ended. "

 

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Questions of Proximate Cause in an Accounting Malpractice Case

In a professional malpractice case, be it legal malpractice or accounting malpractice, plaintiff must be able to show proximate cause.  Might a firm be liable for damages based upon issues that arose before its retention?  It might be, but in Cannonball Fund, Ltd. v Marcum & Kliegman, LLP
2013 NY Slip Op 32891(U)  November 14, 2013  Supreme Court, New York County  Docket Number: 651674/2011  Judge: Bernard J. Fried it was not.

"Plaintiffs bring this action against Marcum & Kliegman, LLP ("M&K"), alleging professional malpractice stemming from M&K's engagement as an auditor of Dutchess Private Equities Fund, L.P. and Dutchess Private Equities Cayman Fund, Ltd. (the "Funds") in 2008. Defendant M&K moves to dismiss the complaint pursuant to CPLR 321 l(a)(l) and (7).

Briefly, the allegations giving rise to this action are as follows. According to the Complaint, the Funds were hedge funds with a similar stated strategy of investing in companies with positive cash flow and in fully secured or liquid securities. (Complaint paras 27, 36). The Funds' common investment manager was Dutchess Capital Management LLC. (Complaint para 16). Between 2004 and 2007, Plaintiffs invested over $13 million in the Funds, with the bulk of the investments made in 2006 and 2007. (Complaint para 6-11).

Plaintiffs allege that they suffered damages as a result of M&K's negligence.(Complaint if 238). Plaintiffs allege that had M&K performed a proper audit, or, I
alternatively, refused to certify the Funds' financial statements, then Plaintiffs would have been alerted to the Funds' problems. (Complaint if 238). Plaintiffs allege that, armed with this  knowledge, they could have made an informed decision as to whether they should remain invested in the Funds or put in requests for "gated redemptions, in which investors could request redemption, subject [to] an amount and timing to be determined by" the Funds. (Complaint if 60). Alternatively, Plaintiffs allege that they could have removed the Funds' management or changed the Funds' investment strategy. (Complaint if 238). M&K moves to dismiss the complaint pursuant to CPLR 3211 (a)( 1) and (7). M&K argues that the allegedly negligent Audit Opinion could not have proximately caused the Plaintiffs' injuries. The Audit Opinion was issued on June 16, 2008. (Complaint if 60). However, all of the redemptions from the Funds were suspended in February 2008 and since that time the Plaintiffs were effectively prohibited from withdrawing their investments. (Complaint , 174). Plaintiffs have demanded full redemption from the Funds, and their
demands have been denied. (Complaint , 183). Thus, M&K argues that even ifthe Audit Opinion had disclosed different information, the resulting losses to the Plaintiffs would have been the same.

However, any new management hired after the Audit Opinion was issued could not have done anything to rectify the losses incurred by the Funds' prior to the time the Audit Opinion was issued in June 2008. For example, in April 2008, two months prior to the issuance of the M&K Audit Opinion, the Funds reported a 33% loss, partially due to the decline in value of the Funds' investment in Challenger. (Complaint ,-i 177). Any new management hired after June 2008 could not have prevented this loss.

Accordingly, Plaintiffs have failed to allege that M&K's negligence was the proximate cause of  laintiffs damages and thus the Complaint fails to state a cause of action for accounting malpractice.

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Conflict? Perhaps. Legal Malpractice? No.

We believe that legal malpractice cases are more harshly reviewed, and held up to a higher standard, almost always in the "but for" portion of the case.  Engelke v Brown Rudnick Berlack Israels LLP   2013 NY Slip Op 07419   Decided on November 12, 2013   Appellate Division, First Department is no exception.  Plaintiff can demonstrate a conflict, but cannot show proximity.  Plaintiff can claim a conflict, but it was already "extinguished."  Plaintiff can show spoliation of electronic evidence, but, hey...he had the material anyway.
 

"The motion court properly dismissed the claim of legal malpractice. Even if plaintiff established the requisite conflict based on the existence of a prior attorney-client relationship, which relationship the parties do not dispute, plaintiff failed to establish that he incurred any damages attributable to defendant's breach of duty (Kodsi v Gee, 100 AD3d 437, 438 [1st Dept 2012]; Leder v Spiegel, 31 AD3d 266, 268 [1st Dept 2006], affd 9 NY3d 836 [2007], cert denied 552 US 1257 [2008]; Estate of Steinberg v Harmon, 259 AD2d 318 [1st Dept 1999]). Plaintiff argues that, by exclusion from the settlement between Pinnacle and Athle-Tech, he was forced to incur more than $1 million in attorney's fees in defending against the second Athle-Tech litigation. However, plaintiff cannot show with sufficient certainty that he would have been able to settle with Athle-Tech and thereby have avoided or reduced his costs. Nor can any alleged damages be attributed to a breach of duty of loyalty based on defendant's prior representation of plaintiff in connection with the Montage SPA. By the time the settlement was made final, plaintiff's indemnification obligations under the Montage SPA were extinguished.

The court also properly denied plaintiff's motion to strike defendant's answer based on the destruction of electronic evidence. Plaintiff had all of the disputed documents and cannot claim any prejudice in pursuing his claim (see Suazo v Linden Plaza Assoc., L.P., 102 AD3d 570, 571 [1st Dept 2013]; McMahon v Ford Motor Co., 34 AD3d 263, 264 [1st Dept 2006]). Plaintiff further fails to establish that any failure to produce the emails was willful (CPLR 3126)."
 

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Does a Retainer Agreement Mean Anything At All?

We've always thought that a retainer agreement between an attorney and a client had some meaning, real meaning.  Emery Celli Brinckerhoff & Abady, LLP v Rose   2013 NY Slip Op 07428 Decided on November 12, 2013  Appellate Division, First Department  disabuses us of that notion, and has two other interesting things about it.  It's the first appeal we've seen from the Law office of Richard Lerner, long an appellate star with Wilson Elser.  The decision also sets forth that an "account stated" cannot be successful if the fees claimed are "intertwined" with the asserted malpractice.
 

"Plaintiff established its entitlement to judgment as a matter of law on its claim for an account stated "by showing that its client received, retained without objection, and partially paid invoices without protest" (Scheichet & Davis, P.C. v Nohavicka, 93 AD3d 478, 478 [1st Dept 2012] [internal quotation marks omitted]; see Miller v Nadler, 60 AD3d 499 [1st Dept 2009]).

Defendant's argument that plaintiff failed to make a prima facie case because it submitted no expert opinion that its retainer agreement and the legal services it rendered were fair and reasonable is unpreserved. Were we to reach the merits, we would find it unavailing. It is not part of a plaintiff's prima facie case on a claim for an account stated to show the reasonableness of the retainer agreement or its legal services (see e.g. Scheichet & Davis. P.C. at 478; Miller at 499). Indeed, in Miller, we found that "[p]laintiff's failure to comply with the rules on retainer agreements ... does not preclude it from suing to recover legal fees for the services it provided" (Miller at 500), and "[i]n the context of an account stated pertaining to legal fees, a firm does not have to establish the reasonableness of its fee" (Lapidus & Assoc., LLP v Elizabeth St., Inc., 92 AD3d 405, 405-406 [1st Dept 2012] [internal quotation marks omitted]).

If a defendant client's legal malpractice claim is intertwined with a plaintiff law firm's claim for legal fees, the plaintiff will not be entitled to summary judgment on its account stated claim. However, if the malpractice claim is not so intertwined, courts are not precluded from [*2]granting the plaintiff summary judgment (see Morrison Cohen Singer & Weinstein v Ackerman, 280 AD2d 355, 356 [1st Dept 2001]).

Here, it was not an improvident exercise of the motion court's discretion to rule, in effect, that defendant had waived his right to raise malpractice by not filing an amended answer by the deadline set by the court (see Quintanna v Rogers, 306 AD2d 167, 168 [1st Dept 2003]). Furthermore, the record shows that plaintiff performed a great deal of work that was unrelated to the purported malpractice.

 

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Are Remedies Available for Excessive Billing by an Attorney?

We found this story in the NYLJ     by Christine Simmons shocking.  Law firm charged hourly rates of $ 300 per hour (combined for all attorneys) PLUS a 40% contingency.  Parents were billed $ 104,000,  paid more than $ 75,000 and the settlement was only  for $ 17,500.

"A federal magistrate judge has referred a Long Island law firm to an attorney disciplinary committee after finding the firm's fees were excessive for the amount of work performed and that it failed to disclose critical facts to support a settlement agreement.

Eastern District Magistrate Judge Gary Brown (See Profile) chastised Leeds Brown Law's conduct in an infant compromise case—a proceeding to obtain court approval of a settlement of a child's claim.

"It is simply astonishing that the Leeds firm would propose an infant compromise in which the fees paid were more than four times the settlement amount, and fail to disclose that fact to the Court," Brown said in C.M. v. Syosset, 11-cv-01402.

Upon Brown's recommendation, the Leeds firm has agreed to return about $70,000 in fees, he said.

The firm in a Nov. 8 letter to the court defended its actions and said nothing unethical occurred and that it was confident that once all the facts were examined the firm would be exonerated from any allegation of wrongdoing.

Leeds Brown Law, a discrimination and civil rights firm with about 10 attorneys, represented C.M., a child whose parents claimed that defendants Syosset Central School District and a school principal, Joanne Mannion, discriminated and retaliated against C.M., who has life threatening food allergies.

In a proposed settlement agreement, the district's insurers would pay $17,500 to C.M.

The parents' attorney, Rick Ostrove, a partner with Leeds, told the court that no attorney fees or disbursements are due or will be paid from the settlement, according to Brown.

Ostrove also wrote that once the settlement money is deposited in C.M.'s bank account, which is linked to his parents' accounts, the funds will be used to pay an outstanding home equity loan his parents took out to cover litigation expenses.

In an August report and recommendation, Brown said the settlement papers failed to say what portion of the settlement fund would be used to offset the loan for legal expenses.

When asked for the figure, the Leeds firm said "the entire amount of the proposed settlement" would be used to pay the loan "as the legal fees substantially exceeded the settlement amount."

Brown asked to see the firm's retainer agreement, which showed the parents were to pay a retainer fee of $15,000, would "replenish" the retainer in increments of $10,000, and that the firm would receive a 40 percent contingency fee based on a certain formula.

In August of this year, Brown said the parties failed to demonstrate the settlement amount is fair and reasonable. "Even though the defendants would pay $17,500, C.M. would receive absolutely nothing, as the entire corpus would be diverted to reimburse attorneys' fees and costs, a fact revealed only upon Court inquiry," Brown said.
 

Overall, Brown said "several instances" of conduct by Ostrove and Leeds "may have run afoul" of the Rules of Professional Conduct.

Brown said there are serious doubts that a contingency fee was appropriate.

He said Ostrove argued that the hybrid fee arrangement was justified based on the firm's expertise, write-off of blocks of time and "discounted" hourly rate of $300.

"I cannot credit the contention that $300 per hour for all attorneys in the firm represented a significant discount justifying the draconian contingency arrangement," Brown said.

But "perhaps the most troubling aspects of this matter arise from the failure by Ostrove to comply" with the settlement procedures, Brown said, including the failure to disclose material information.

"The seriousness of these deficiencies, considered together with the surrounding circumstances, raise the specter of whether these omissions and misstatements represent stratagems rather than oversights," Brown said.

"By failing to disclose the attorneys' fees charged and paid, and revealing only that certain of the funds would be used to pay off a loan that had been for legal costs and fees, the application filed by Ostrove clearly evaded dictates of state and federal law requiring that the Court review attorneys' fees arrangements entered in connection with a claim by a minor plaintiff," Brown said.

He said these failings taken together may implicate Rule 3.3, which provides that a lawyer shall not knowingly make a false statement of fact or law to a tribunal or fail to correct a false statement.

The Leeds firm agreed to return all fees except for $5,000, about 28.6 percent of the settlement. The remainder, $12,500, will be deposited into an account for the child's benefit, to be held until he reaches a suitable age, Brown said in the October report, which must be approved by U.S. District Judge Margo Brodie. (See Profile)

The magistrate judge said he was mindful that the Leeds firm voluntarily agreed to refund about $70,000."
 

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Legal Malpractice As The Disfavored Child

People question whether "they" like us?  Do "they" treat us fairly?  We wonder whether legal malpractice is treated differently than all other law suits? Fielding v Kupferman, 2013 NY Slip Op 02008 Appellate Division, First Department raises the question once again. Compare this case to a garden or varietal slip and fall. Example: plaintiff trips over a defective step and breaks his leg. Would the Appellate Division then discuss whether breaking a bone was better than what might have happened, were plaintiff to fall down an entire flight of stairs and break his neck? We believe that it would not.
 

Nevertheless, this is what happens regularly in a legal malpractice case. Take Fielding as an example. "Defendants established their entitlement to judgment as a matter of law in this action alleging legal malpractice. Defendants submitted evidence showing that the divorce settlement, in which plaintiff achieved his goal of retaining the parties' marital residence, was advantageous to plaintiff, and resulted in his receiving consideration that more than compensated him for the allegedly unforeseen tax consequences of liquidating his Keogh account (see e.g. Kluczka v Lecci, 63 AD3d 796, 798 [2d Dept 2009]). Defendants also submitted evidence demonstrating that the subject tax consequences were discussed with plaintiff during the course of the settlement negotiations.

In opposition, plaintiff failed to raise a triable issue of fact. His argument that if he had been properly advised on the tax consequences, he would have reached a better settlement or outcome after trial, is speculative (see Klucka at 798). Plaintiff failed to take into account the benefits he received in the actual settlement, including buying out his wife's share of the marital residence based on an outdated appraisal that assigned a value that was significantly lower than the actual value at the time the agreement was executed. Moreover, plaintiff failed to provide proof of any ascertainable actual damages sustained as a result of the alleged negligence (see Lavanant v General Acc. Ins. Co. of Am., 212 AD2d 450 [1st Dept 1995]). [*2]

Under the circumstances presented, plaintiff's claim for disgorgement of legal fees already paid was properly dismissed."

 

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The Case Is More Than 20 Years Old and Still a Mess

This legal malpractice case started around 1991.  It's been up to the AD 4th Department, back down to Supreme Court and now is back at the AD.  Here is their recitation.  We love the attorney masquerading as a doctor and a Vet reviewing human medical records. From:  Dischiavi v Calli
2013 NY Slip Op 07289   Released on November 8, 2013   Appellate Division, Fourth Department
"Memorandum: Plaintiffs commenced this action seeking damages for, inter alia, breach of contract, legal malpractice and fraud, alleging, among other things, that defendants failed to commence timely legal actions to recover damages arising from injuries sustained by Gary M. Dischiavi (plaintiff). Plaintiffs allege in their complaint that plaintiff was injured as the result of an accident that occurred while he was on duty as a City of Utica police officer in 1991, and that he was further injured as a result of his ensuing medical treatment. Although plaintiffs retained defendant law firm of Calli, Kowalczyk, Tolles, Deery and Soja (CKTDS) to represent them with respect to possible claims arising from those injuries, no action was ever instituted. Plaintiffs further allege that defendants purported to have plaintiff examined by an expert physician but had a lawyer examine him instead, purported to have other expert physicians review plaintiff's medical records but had a veterinarian perform that review, misrepresented that they had commenced a personal injury action on plaintiffs' behalf, and created a fake settlement agreement for that "action." This case was previously before us on appeal, and we determined, inter alia, that Supreme Court erred in granting the motions and cross motion of various defendants for summary judgment dismissing the complaint in its entirety against them (Dischiavi v Calli [appeal No. 2], 68 AD3d 1691, 1692-1694). "

To the extent that defendants sought summary judgment dismissing the first and second causes of action on the ground that the applicable three-year statute of limitations had expired prior to the commencement of this action (see CPLR 214 [6]; see generally Zorn v Gilbert, 8 NY3d 933, 933-934), we conclude that they met their initial burden on their respective motions. We further conclude, however, that plaintiffs raised a triable issue of fact whether the doctrine of continuous representation tolled the statute of limitations (see generally Shumsky v Eisenstein, 96 NY2d 164, 167-168). The court therefore properly determined that defendants were not entitled to the relief sought based on the statute of limitations.

We agree with all defendants that the court erred in denying those parts of their motions seeking summary judgment dismissing the third cause of action, for fraud, against them. Thus, we modify the order accordingly. "The elements of a cause of action for fraud require a material misrepresentation of a fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff[s] and damages" (Eurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d 553, 559; see Ross v Louise Wise Servs., Inc., 8 NY3d 478, 488; Lama Holding Co. v Smith Barney, 88 NY2d 413, 421). "Where, as here, a fraud [cause of action] is asserted in connection with charges of professional malpractice, it is sustainable only to the extent that it is premised upon one or more affirmative, intentional misrepresentations . . . which have caused additional damages, separate and distinct from those generated by the alleged malpractice" (White of Lake George v Bell, 251 AD2d 777, 778, lv dismissed 92 NY2d 947; see Tasseff v Nussbaumer & Clarke, 298 AD2d 877, 878; see generally Wells Fargo Bank, N.A. v Zahran, 100 AD3d 1549, 1550, lv denied 20 NY3d 861). We agree with defendants that they met their initial burden on their motions by establishing that plaintiffs did not sustain any additional damages as a result of the alleged fraud, and plaintiffs failed to raise a triable issue of fact (see generally Alvarez v Prospect Hosp., 68 NY2d 320, 324-325). Contrary to plaintiffs' contention, this Court's prior order denying those parts of the respective defendants' initial motions and cross motions "pursuant to CPLR 3211 (a) (7) to dismiss the complaint, which w[ere] addressed to the sufficiency of the pleadings, did not establish the law of the case for the purpose of their subsequent motion[s] pursuant to CPLR 3212 for summary judgment, which [were] addressed to the sufficiency of the evidence" (Thompson v Lamprecht Transp., 39 AD3d 846, 847).
 

On their cross appeal, plaintiffs contend that the court erred in dismissing the first and second causes of action insofar as they are premised upon defendants' failure to commence a personal injury action. The court granted defendants' motions for summary judgment dismissing those causes of action to that extent based on its determination that the statute of limitations therefor had expired before plaintiffs retained any of the defendants. Plaintiffs now contend that the statute of limitations for those causes of action was extended several times by amendments to General Municipal Law § 205-e (2), which resulted in the revival of plaintiffs' causes of action until a time after they first retained CKTDS. That contention is not properly before us because it is raised for the first time on appeal, and "[a]n issue may not be raised for the first time on appeal . . . where it could have been obviated or cured by factual showings or legal countersteps' in the trial court" (Oram v Capone, 206 AD2d 839, 840, quoting Telaro v Telaro, 25 NY2d 433, 439, rearg denied 26 NY2d 751). The revival statute on which plaintiffs rely applies to causes of action that "would have been actionable on or after January [1, 1987] had this section been effective" (§ 205-e [2]), and we conclude that defendants could have made a factual showing that plaintiffs' first and second causes of action insofar as they are premised upon defendants' failure to commence a personal injury action were not actionable because they were precluded by plaintiff's receipt of benefits pursuant to General Municipal Law § 207-c. "

 

 

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16 Year Gap is Too Big for Legal Malpractice Case

Case is marked "disposed."  This can happen when there is a failure to appear in court, when a motion goes unanswered, or when some other event transpires and the court routinely "disposes" of a case administratively.  It can also happen after a contested motion is decided.  How Plaintiff's case was disposed of in Champlin v Pellegrin 2013 NY Slip Op 07257  Decided on November 7, 2013  Appellate Division, First Department we don't know.
 

What we do know, from the decision, is that none of the suggested reasons why the case was still timely worked.  "Contrary to plaintiff's assertions, the claim was not tolled by the continuous representation doctrine. Generally, tolling under the continuous representation doctrine "end[s] once the client is informed or otherwise put on notice of the attorney's withdrawal from representation" (Shumsky v Eisenstein, 96 NY2d 164, 171 [2001]). The parties do not dispute that there were no communications between them from 1994 until 2011, when plaintiff purported to discharge defendant from representing him. The more than 16-year lapse in communications from defendant was sufficient to constitute reasonable notice to plaintiff that defendant was no longer representing him.

Furthermore, as there was no "clear indicia of an ongoing, continuous, developing, and dependent relationship between [plaintiff and defendant]" (Pittelli v Schulman, 128 AD2d 600, 601 [2d Dept 1987] [internal quotation marks omitted]), or a "mutual understanding of the need for further representation on the specific subject matter[s] underlying the malpractice claim" [*2](McCoy v Feinman, 99 NY2d 295, 306 [2002]), we find that plaintiff's reliance on CPLR 321(b) is misplaced. "

 

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Not Legal Malpractice, But A Lot of Other Things

Client has lost millions and goes to attorney.  Attorney arranges for a private investigator to work on the case.  So far so good?  The investigator's contract called for payment of $ 350,000 plus 25% on success in locating assets.  Clients thought this too much.  Can a complaint for fraud adequately be stated on these facts?

In Moche v Srour  2013 NY Slip Op 32740(U)  October 26, 2013  Sup Ct, New York County
Docket Number: 157764/2012  Judge: Eileen A. Rakower tells us that the answer is yes.

"This action arises from the retention of a private investigator on Plaintiffs' behalf by their attorney. In this action, plaintiffs Charles M. Moche and Ezra S. Moche (collectively, "Plaintiffs"), residents of New Jersey, contend they "were individuals who were victims of a real estate fraud scheme which caused them to lose millions of dollars." Plaintiffs allege that they thereafter "retained Deborah R. Srour, Esq. Srour and the law firm of Cox, Padmore Skolnick & Skarachy LLC to help regain the money they had lost." Plaintiffs further allege that Srour thereafter "took undue advantage of plaintiffs' desperate situation because of their significant losses and entered into an agreement with defendant Patrol H.Y. Security (2007) Ltd. (Patrol) and Chaim Sharvit (Sharvit) purportedly obligating plaintiffs [sic] to pay Patrol $350,00 caused plaintiffs [sic] to give $225,000 to Patrol."
Plaintiffs allege, "Sharvit provided almost no services or work product to plaintiffs yet retained plaintiffs' $225,000.00 and demanded the additional $125,000 purportedly due under Srour's agreement." Plaintiffs further allege that "[u]pon information and belief, Sharvit shared those funds with Srour and/or Cox Padmore while Srour in fact during said period in question was purportedly representing plaintiff and had a fiduciary obligation to plaintiff."

"Here, accepting the allegations as true that Srour "at the time of entering into the agreement either acted as Patrol's attorney and/or partner, and failed to disclose same to plaintiffs," "Sour also concealed that under the agreement ... , Sharvit was not obligated to do anything," and "Upon information and belief, Sharvit shared those funds with Srour and/or Cox Padmore ... ," Plaintiffs have stated claims for fraud and fraud in the inducement as against Srour and Cox Padmore.
 

The second cause of action of the Amended Complaint is for unjust enrichment. "[T]o prevail on a claim of unjust enrichment, "a party must show that (1) the other party was enriched, (2) at that party's expense, and (3) that 'it is against equity and good conscience to permit [the other party] to retain what is sought to be recovered."' (Cruz v. McAneney, 31 A.D.3d 54, 59 [2006]). "The existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter." Clark-Fitzpatrick, Inc. v. Long Island R.R. Co., 70 N.Y. 2d 382, 399 [1987]. "[A] party is not precluded from proceeding on both breach of contract and quasi contract theories where there is a bona fide dispute as to the existence of a contract or where the contract does not cover the dispute in issue." Curtis Props. Corp. v. Greif Cos., 236 A.D.2d 237, 239 (1st Dep't 1997). A bona fide dispute exists where a defendant alleges unconscionability or fraud. (Id.). Here, accepting the allegations that Plaintiffs paid Sharvit and Patrol $225,000 for services that were not adequately invoiced or rendered, that Srour and Cox Padmore shared those funds, and the contract entered by Srour with Patrol and Sharvit on Plaintiffs' behalf was unconscionable, Plaintiffs have stated a claim for unjust enrichment.

The third cause of action of the Amended Complaint is for breach of fiduciary duty. The elements of a cause of action for breach of fiduciary duty include (1) the existence of a fiduciary relationship; (2) misconduct; and (3) damages caused by the misconduct. (Armentano v. Paraco Gas Corp., 90 AD3d 683, 935 NYS2d 304 [2nd Dept 2011]). Based on the allegations that Srour, as Plaintiffs' attorney, "prepared the agreement with Sharvit to the benefit of Sharvit and the detriment of plaintiffs" and thereafter shared in those funds that Plaintiffs paid to Sharvit without Plaintiffs' knowledge," Plaintiffs have stated a claim for breach of fiduciary as against Srour and Cox Padmore. The fourth cause of action of the Amended Complaint is for legal malpractice
stemming from Plaintiffs' recommendation of Patrol and Sharvit. In order to prevail against an attorney on a legal malpractice claim, a plaintiff must first prove that the  attorney was negligent, that such negligence was the proximate cause of the loss sustained, and that actual damages resulted therefrom (see Tydings v. Greenfield, Stein& Senior, 2007 NY Slip Op 6734, *2 [1st Dept. 2007]). An attorney does not, except by express agreement, guarantee results. Weinberg v. Needelman, 226 A.D. 3,4-5 [1st Dept 1929], aff'd, 252 N.Y. 622 [1930]. "[A]n attorney is not held to the rule of infallibility and is not liable for an honest mistake of judgment, where the proper course is open to reasonable doubt. Thus, 'selection of one among several reasonable courses of action does not constitute malpractice."' Bernstein v. Oppenheim & Co.,  P.C., 160 A.D.2d 428, 430 [151 Dept 1990]. Here, Plaintiffs' legal malpractice claim is based on Srour's recommendation which they followed in the retention of the private investigator. This allegation alone is insufficient to make out a legal malpractice claim."

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Where May You Bring That Legal Malpractice Case?

Plaintiff is injured while at work as a teacher in NYC and goes to an attorney. The attorney advises her to bring a Workers' Compensation Claim, and does so for her. More than 90 days passes, and lo and behold, it turns out that Teachers in NYC are not covered by WC, and are (must) bring a personal injury claim. It's too late for plaintiff. Is this legal malpractice?

Supreme Court did not think so. The Appellate Division, however, did. Gaskin v Harris 2012 NY Slip Op 06123 ;  Appellate Division, Second Department .
 

"However, the Supreme Court should not have granted that branch of the defendant's cross motion which was to pursuant to CPLR 3211(a)(1) and (7) to dismiss the cause of action alleging legal malpractice. To recover damages for legal malpractice, a plaintiff is required to show that the defendant attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession, and that the attorney's breach of this duty caused the plaintiff to suffer actual and ascertainable damages (see Dombrowski v Bulson, 19 NY3d 347, 350; Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442; McCoy v Feinman, 99 NY2d 295, 301-302; Gershkovich v Miller, Rosado & Algios, LLP, 96 AD3d 716, 717). When determining a motion to dismiss pursuant to CPLR 3211(a)(7) for failure to state a cause of action, the court must accept the facts alleged in the pleading as true, accord the plaintiff the benefit of every possible [*2]inference, and determine only whether the facts as alleged fit within any cognizable legal theory (see Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d 314, 326; Leon v Martinez, 84 NY2d 83, 87; Marom v Anselmo, 90 AD3d 622, 623), and "may freely consider affidavits submitted by the plaintiff to remedy any defects in the complaint" (Leon v Martinez, 84 NY2d at 88; see Berman v Christ Apostolic Church Intl. Miracle Ctr., Inc., 87 AD3d 1094, 1096-1097; Kopelowitz & Co., Inc. v Mann, 83 AD3d 793, 797). Further, a motion pursuant to CPLR 3211(a)(1) may be granted "only where the documentary evidence utterly refutes plaintiff's factual allegations, conclusively establishing a defense as a matter of law" (Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d at 326; see Leon v Martinez, 84 NY2d at 88; Robertson v Wells, 95 AD3d 862, 863; Magnus v Sklover, 95 AD3d 837, 837).

Applying these principles here, the complaint, as amplified by the affidavits submitted by the plaintiff, adequately states a cause of action to recover damages for legal malpractice. The plaintiff alleges that the defendant negligently advised her to seek Workers' Compensation benefits for injuries sustained in the course of her employment as a substitute teacher, when he should have known, as an attorney specializing in this area, that New York City teachers and substitute teachers are not covered by the Workers' Compensation Law. She further claims that the defendant advised her to pursue a baseless Workers' Compensation claim instead of litigation, failed to advise her of the deadline for filing a notice of claim, and counseled her against accepting a mediator's recommended settlement that would have afforded her some compensation for her injuries. Although the documentary evidence submitted by the defendant establishes that he promptly filed a Workers' Compensation claim on the plaintiff's behalf, and that the claim was denied on the ground that New York City teachers, including substitute teachers, are not covered by the Workers' Compensation Law, this evidence does not conclusively establish a defense to the plaintiff's asserted malpractice claims. Accordingly, the Supreme Court should have denied that branch of the defendant's cross motion which was to pursuant to CPLR 3211(a)(1) and (7) to dismiss the cause of action alleging legal malpractice (see Magnus v Sklover, 95 AD3d at 837; Ofman v Katz, 89 AD3d 909, 910; Thompsen v Baier, 84 AD3d 1062, 1063).
 

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More Bello Malpractice Cases

Last week we reported on the disbarment of Tom Bello of Staten Island in Matter of Bello ;2013 NY Slip Op 06859 ;  Decided on October 23, 2013 ; Appellate Division, Second Department  ;  Per Curiam.

Today, we see some of the after effects of his representation of other clients.  in Stein v Research Found. City Univ. of N.Y. 2013 NY Slip Op 51812(U) ;  Decided on October 28, 2013 ;  Supreme Court, Richmond County ;  Maltese, J.


"In or about September of 2006, the plaintiff was terminated by the Small Business Development Center (hereinafter "SBDC") located on the campus of the College of Staten Island. The SBDC is one of twenty four regional centers of the New York State Small Business [*2]Development Center and receives funding from the City and State Universities of New York."

"In the years following his termination, plaintiff contacted the Public Integrity Bureau of the New York State Attorney General's office, the Civil Rights Center of the United States Department of Labor, the Department of Investigation for the City of New York, the United States Department of Justice and the Equal Employment Opportunity Commission before ultimately filing suit against the City University of New York, the SBDC, the College of Staten Island and Dean Balsamini in April of 2011.The plaintiff indicated that he, along with others from the college, retained the services of Attorney Thomas Bello to assist them in the legal proceedings. The record is unclear as to how long this relationship lasted, but the plaintiff's submissions indicate Attorney Bello failed to file necessary documents even though he provided the plaintiff with notarized documentation and advised him the case was proceeding smoothly. Attorney Bello has previously been the subject of a legal malpractice suit brought by a different individual and is under investigation by the Staten Island District Attorney.[FN1] The record is also unclear as to the status of any proceeding brought by plaintiff against Attorney Bello concerning their relationship. However, on October 23, 2013 the New York Supreme Court Appellate Division, Second Department in Matter of Thomas F. Bello, an attorney and counselor-at-law, discipline number D38484 issued an order accepting the resignation of Attorney Thomas F. Bello from the bar and thereby disbarred him and struck his name from the roll of attorneys and counselors-at-law.[FN2] "

"Moreover, the plaintiff's instant action is not based on legal malpractice but instead is centered on the alleged actions of the Research Foundation. While the court recognizes the plaintiff may have a malpractice action based on Attorney Bello's failure to appropriately file documents in the 2011 case before the statute of limitations period expired,[FN11] any such claim does not bear on the res judicata analysis since the malpractice suit is separate and apart from his claim against this defendant. The substance of his current claim against the Research Foundation is the same as his previous claim and thus cannot be re-litigated. The plaintiff's claims against Attorney Bello would be best pursued in a separate action provided it is not filed outside the three year statute of limitation which runs from the date of the original malpractice.[FN12]
"

 

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Legal Malpractice Claim Survives While Judiciary Law 487 Claim is Dismissed

Client wants to open a business.  Client goes to attorney to make sure that the store she is building in NYC will meet all codes.  Attorney tells her no employee bathroom is necessary.  The City says it is necessary.  She loses the store as a result.  Legal Malpractice?

In Cavlak v Helbraun;  2013 NY Slip Op 32704(U);  October 25, 2013;  Supreme Court, New York County;  Docket Number: 103896/2012;  Judge: Richard F. Braun says that the legal malpractice claim remains, while all other causes of action are dismissed.

"This is an action sounding in negligence, legal malpractice, violation of Judiciary Law§ 487, breach of fiduciary duty, and breach of contract, all arising out of the review by defendant David
Helbraun (defendant) of plaintiffs lease for plaintiffs storefront take-out window bakery/ cafe and
giving of advice in relation thereto. Plaintiff contends that she was not properly advised by defendant of the need for an available employee bathroom under the New York City Health Code. After receiving a number of citations for New York City Health Code violations, including one for the lack of an available employee bathroom, plaintiff maintains that she was forced to end the operation of her business, which caused her to lose her investment in the business. Defendant contends that the complaint should be dismissed, pursuant to CPLR 3211 (a) (1) and (7), based on the documentary evidence that he submitted and because plaintiff has failed to state a cause of action.·"

"Plaintiff has stated a cause of action for legal malpractice sufficient to withstand a motion to dismiss, insofar as she alleges that she was not properly apprised of the implications of a lack of an employee bathroom for the premises, which ultimately caused her to lose her business and her investment therein. Plaintiff effectively pleads that she was erroneously advised that a bathroom for employees was not required. Defendant contends that under then NYCHC § 81.29 (a) (now modified in § 81.22 [a]) a bathroom for employee use need not be in the actual store, but that some facilities must be available for employee use. Even assuming that bathrooms in nearby
restaurants could serve that function, bathrooms in those restaurants were not available at the time
of the New York City Department of Health inspection because the restaurants were not open and
thus seemingly would not ordinarily be available during plaintiffs prime morning hours. Had
plaintiff not been advised that a bathroom for employees was not required, as alleged, she would not have faced this dilemma. While defendant asserts that the violation could have been challenged and cured, that would involve a determination on proximate cause beyond the face of the pleading (cf Bernardi v Spyratos, 79 AD3d 684, 688 [2nd Dept 2010] [where the determination on causation was on a motion for summary judgment]). Indeed, plaintiff maintains that she obtained documents showing that she was authorized to use the bathroom in the restaurant next door and presented them at a hearing, apparently to no avail.

"Failure to exhaust administrative remedies is not a defense to a legal malpractice claim, but rather generally bars a judicial challenge to an administrative action (see Watergate II Apts. v Buffalo Sewer Auth., 46 NY2d 52, 57 [1978]). While a failure to exhaust administrative remedies could be a factor in determining whether an attorney's negligence was a proximate cause of a plaintiffs damages (cf Catuzza v Rodriguez, 93 AD3d 1214, 1214-1215 [4th Dept 2012] [the defendant attorneys in a legal malpractice action failed to establish as a matter of law that the plaintiff employee's complaint against the county would have been dismissed on the ground that he failed to exhaust his administrative remedies]), that too goes beyond the issue of the sufficiency of the pleading."

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Is It Legal Malpractice Not to Produce Bills for Attorney Work?

In a most ironic turnabout. a law firm is sued for not producing bills.  Often enough, it is claimed that legal malpractice cases start up when a law firm actually bills the client.  Not here, in TufAmerica, Inc. v Warshavsky  2013 NY Slip Op 32690(U)  October 24, 2013  Sup Ct, New York County  Docket Number: 157795/12  Judge: Anil C. Singh.   Plaintiff loses here on the statute of limitations.  Here is the back story:

"Plaintiff TufAmerica, Inc. ("TufAmerica") retained defendant Oren Warshavsky ("Warshavsky"), a New York attorney, to provide legal services beginning in August 1999 in connection with a lawsuit brought by Wardell Quezergue and Joseph Johnson against TufAmerica in federal district court in
New Orleans, Louisiana. Warshavsky also represented TufAmerica in connection with a second suit brought against TufAmerica by the same two plaintiffs in 2002, this one in state court in Louisiana. Warshavsky was admitted pro hac vice in connection with both lawsuits, and entered an appearance as counsel for TufAmerica in both lawsuits. In the federal court suit, the court in a December 11, 2000, decision awarded summary judgment to TufAmerica against another defendant, Joe Jones, for copyright infringement, and awarded TufAmerica its attorneys' fees as to the claims against Joe Jones only."

When the time came, and TufAmerica had to produce bills so that they could be reimbursed, the bills could not be found.

"On May 31, 2006, plaintiff's local counsel in Louisiana, Dino Gankendorff, sent the following e-mail to Warshavsky:
Oren:
I am still tring [sic.] to get in touch with you on the motion to compel.
I have called you everyday for almost two weeks now and have not
heard back. We have a hearing on this Friday, June 2, and face a
serious problem. In reviewing the file, we have already agreed to
produce certain documents, see your letter dated June 17, 2005.
Donald Hyatt reports that he never received these docs. nor has our
office. Frankly, I don't see how I can go to court on Friday and
objection [sic.] to this production when we have already agreed to
produce these documents. In short, I need you to overnight me these
documents referenced in your letter dated June 17, 2006 today so we
can produce them at the hearing on Friday or I feel certain that the
Judge will cast us with attorney's fees and sanctions. Please let me
hear from you immediately. Thanks  dino
(Pergament Affirmation, exhibit A).
 

"Later that day, Warshavsky replied:


I do not have any documents, and if Tuff City does not have the bills
then there is not much that can be done - sometimes there are no
documents found, and we can only give circumstantial evidence.
Essentially, they want back up data - sorry, it is gone. And the
company that generated the bills, Cobrin & Gittes, ceased operation
in April 2002."

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How Far is Too Far in Legal Malpractice?

The Surrogate of New York County has undoubtedly been presented with unique cases and big estates, but Matter of Eisenberg  2013 NY Slip Op 51713(U)  Decided on October 15, 2013
Sur Ct, New York County  Mella, J. presents some unusual issues.

  Start with an attorney who boldly proclaims her lack of knowledge of wills, trusts and estates law (""Further, I am not an experienced attorney relating to trust and estate matters given its challenges, whereby I am gaining competency as we go because I am required to do so on my own. ""With my full disclosure however, I do want to assure you that I can manage all such issues and its [sic] complexity as that is my specialty overall in practicing law where my skills are unique as a lawyer.")

End with the attorney seeing incompetency everywhere: "  "the record speaks to [sic] itself as to how much Petitioners have worked to make all parties on the record and this Court to understand the law and its duties for proper trust administration. In fact, it ought to be clear to this Court that it is Petitioners who have the greatest understanding of the laws of Trusts and Estates over all other attorneys assigned to these matters. The record speaks for itself that it is this Court who has no understanding of the record and the law over the course these [sic] entire matters . . . If this Court is not prepared to understand each and every legal detail and its implications being said and executed [sic], then this Court should not have ruled upon it to cause more harm. . . No staff has been assigned to understand the record and legal documents that are being ruled on, except for a single court attorney who does not possess enough knowledge to help resolve these matters effectively. . . Yet, Judge Glen ruled in her limited [*14]understanding . . ."
 

Continue to a claim in US District Court which is dismissed in its entirety' "Finally, in January 2011, Law Offices of Seema Verma PLLC filed a complaint in the United States District Court for the Southern District of New York, alleging eleven claims against defendants Citigroup, Inc., et al. The March 23, 2011 order of Judge Paul A. Crotty, dismissing the complaint, provides:

"The allegations . . . suggest that Citigroup and related entities have billions of dollars of clients' assets and they exercise control over law firms, which are only too anxious to cooperate with the bank. The Complaint suggests that the bank controls and directs the New York Attorney General's office; [sic] and improperly influences the New York County Surrogate's Court. Finally, the Complaint alleges that as a result of Citigroup's unlawful practices and conflict of interest relationships, Plaintiff lost her client and has suffered substantial financial losses and hardships (i.e., lost legal fees).

* * * * *
"The gravamen of the Complaint deals with certain actions involving a trust in a litigated Surrogate's Court proceeding. Plaintiff believes that a large trust affects interstate commerce all by itself. This is quite wrong. While it is not clear how any facet of a proceeding pending before the Surrogate's Court can be the subject of a monopoly claim under Sherman Act §2, the Complaint is barren of any allegation of a monopoly or any attempt to monopolize any part of the trade or commerce among the several states. . .

 


* * * * *
"Whatever else may be said concerning Plaintiff's claim that she is entitled to her legal fees for representing a party in a contested Surrogate's Court proceeding, it does not amount to a plausible anti-trust claim, Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).
"When the Court advised Plaintiff that she had failed to state a claim under the Sherman Act or the Clayton Act, and that if Defendants were forced to make a motion to dismiss for failure to state a claim, the Court would permit a motion for sanctions, the Plaintiff decided to withdraw her Complaint."
 

In the end the attorney is treated quite well by Surrogate's Court.  "Throughout these proceedings, Seema Verma, Esq., has demonstrated a clear want of understanding. The imposition of sanctions, in the instant case, would advance neither the [*15]punitive nor prophylactic purpose of sanctions.[FN19] Therefore, the court declines to impose costs and sanctions and so denies the motion of Citibank.

V.Ms. Hamada's Motion for a Determination of the Attorney's Lien of the Law Officesof Seema Verma PLLC:

Ms. Hamada has moved for a determination of the value of Verma's attorney's lien, so that Citibank, as trustee of the revocable trust, may make distributions.[FN20]

Even if the court were to assume, arguendo, that Verma had a right to a

charging lien pursuant to Judiciary Law § 475, upon her discharge by Ms. Hamada, Verma was limited, at most, to a fee based on quantum meruit for the reasonable value of its services (see Campagnola v Mulholland, 76 NY2d 38, 43-44 [1990]). The court having determined Verma's SCPA 2110 petition, Ms. Hamada's motion is moot, and, accordingly, it is dismissed. "

 

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Independent Contractors and Legal Malpractice

Plaintiff retains attorney to arrange for a tax free gift to her son.  The IRS cutoff for tax free gift v. taxable gift is $1 million.  She did not have a million in cash.  However, she owned a valuable building in Manhattan. So, the law firm selected a Real Estate appraiser and arranged for the transaction.  Problem?  The IRS challenged, and Plaintiff had to pay $ 180,000 in additional tax.  Was the law firm responsible for the mistake of the RE appraiser, or was the appraiser an independent contractor for whom they were not responsible?

Put another way, is this a Kleeman v. Rhinegold problem or not?  There the attorney was responsible for negligent process service.  Here, in Goldstein v Stern Keiser & Panken, LLC
2013 NY Slip Op 32666(U)  October 18, 2013  Supreme Court, New York County  Docket Number: 157177/12  Judge Joan A. Madden decided that the attorneys were not responsible.

From Kleeman : "The most often cited formulation is that a duty will be deemed nondelegable when "`the responsibility is so important to the community that the employer should not be permitted to transfer it to another'" (id., at 119, quoting Prosser and Keeton, op. cit., at 512). This flexible formula recognizes that the "privilege to farm out [work] has its limits" and that those limits are best defined by reference to the gravity of the public policies that are implicated (5 Harper, James and Gray, Torts § 26.11, at 73 [2d ed]; see also, id., at 76-77).

Viewed in the light of these principles, the duty at issue here — that owed by an attorney to his or her client to exercise care in the service of process — fits squarely and neatly within the category of obligations that the law regards as "nondelegable." Manifestly, when an individual retains an attorney to commence an action, timely and accurate service of process is an integral part of the task that the attorney undertakes (see, 5 Harper, James and Gray, op. cit., at 76-77; cf., Feliberty v Damon, supra, at 120). Furthermore, proper service of process is a particularly critical component of a lawyer's over-all responsibility for commencing a client's lawsuit, since a mistake or oversight in this area can deprive the client of his or her day in court regardless of how meritorious the client's claim may be. Given the central importance of this duty, our State's attorneys cannot be allowed to evade responsibility for its careful performance by the simple expedient of "farming out" the task to independent contractors.

The existence of an extensive and comprehensive Code of Professional Responsibility that governs the obligations of attorneys to their clients reinforces our conclusion. Under the Code, a lawyer may not "seek, by contract or other means, to 276*276 limit prospectively the lawyer's individual liability to a client for malpractice" (DR 6-102, 22 NYCRR 1200.31). Moreover, the Code forbids lawyers from "[n]eglect[ing] legal matter[s] entrusted to [them]" (DR 6-101 [A] [3], 22 NYCRR 1200.30 [a] [3]), enjoins them to assist in "secur[ing] and protect[ing] available legal rights" (EC 7-1) and requires them to represent their clients as zealously as the "bounds of the law" permit (Canon 7). All of the latter ethical and disciplinary considerations are implicated when a client's lawsuit is undermined — or even defeated — as a consequence of carelessness in the service of process.

Our conclusion is also supported by the perceptions of the lay public and the average client, who may reasonably assume that all of the tasks associated with the commencement of an action, including its formal initiation through service of   process, will be performed either by the attorney or someone acting under the attorney's direction. While it may be a common practice among attorneys to retain outside agencies like Fischer's to assist them in effecting service, that custom is not necessarily one of which the general public is aware. Even where a client is expressly made aware that a process serving agency will be retained, it is unlikely that the client will understand or appreciate that the process serving agency's legal status as an "independent contractor" could render the retained attorney immune from liability for the agency's negligence. Under established principles, the client's reasonable expectations and beliefs about who will render a particular service are a significant factor in identifying duties that should be deemed to be "nondelegable" (see, Restatement, op. cit., § 429; see also, Feliberty v Damon, supra, at 120).

Finally, we conclude that permitting lawyers to transfer their duty of care to process servers would be contrary to sound public policy. In this State, licensed attorneys have been granted an exclusive franchise to practice law, with the understanding that they have both the specialized knowledge and the character required to represent clients in a competent, diligent and careful manner. Under this system, lawyers are authorized to hold themselves out as being uniquely qualified to manage their clients' legal affairs, a task that unquestionably includes the commencement of lawsuits. While it is true that the State also licenses nonlawyers to perform certain discrete, law-related tasks such as service of process (see, General Business Law art 8), the existence of that licensing system certainly does not evince a governmental intent to 277*277 relieve attorneys of the responsibilities implicit in their franchise."

From Goldstein:   In the present matter, where there is no allegation that SKP was negligent in choosing JDM, where there is no non-delagable duty, or dangerous condition, the attorney defendants are not liable for JDM's alleged negligence iri preparing the report.  Plaintiff has made no allegations which would establish that SKP I should be held vicariously liable for JDM's  mistake. There is no showing that the attorney defendants' negligence was the proximate cause of plaintiff's injuries, or that "but foru their handling of any duty owed to plaintiff, plaintiff would not have
been injured. Consequently, the attorney defendants' motion to dismiss the complaint is granted."
'

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Departure? Yes, but no Ascertainable Damages Shown

Plaintiffs inIsaacson v Law Off. of Norman L. Horowitz, LLC    2013 NY Slip Op 32598(U) October 18, 2013;  Supreme Court, New York County;  Docket Number: 112174/2010;  Judge: Joan A. Madden were commercial tennants who became disenchanged with the building after a big burglary.  They had a 'good guy" guarantee, and attempted to terminate their lease without penalty.  This attempt did not turn out well.  However, Supreme Court held that they could not prove exactly how the landlord would have handled the case, and could not show ascertainable damages.
 

"Upon instruction from defendants, plaintiffs sent the landlord written notice that they were vacating the premises as of July 31, 2009, with a line for the landord to countersign.  The landlord refused to do so, notifying plaintiffs of this fact in a letter to defendants, where the landlord also declined to accept surrender of the lease, and instructed defendants that the landlord would hold plaintiffs to their rent obligations.

Defendants apparently did not inform plaintiffs of this letter and continued to advise plaintiffs to move forward with vacating the premesis.

Plaintiffs retained their present counsel after the decision was rendered. On June 25, 2010, the court entered an order and judgment awarding the landlord $851,618.27 against the tenants,
representing unpaid rent, interest and penalties. An award of $595,235.92 was rendered against the guarantors, under the guaranty. However, plaintiffs' new counsel eventually negotiated
a settlement of the entire matter for $500,000. In the present action, commenced on September 15, 2010,plaintiffs seek damages against defendants on the ground that, but for defendants' faulty advice, plaintiffs could have settled with the landlord before vacating the premises, and before the
commencement of any lawsuits, at a much lower figure than the $500,000 settlement amount which was eventually reached. In the present motion, defendants move to dismiss the
complaint, on the ground that plaintiffs cannot prove that they would have fared better in settling the amount had they not heeded defendants' advice."

"If proximate cause is not established, the action must be dismissed "regardless of whether it is demonstrated that the attorney was negligent." Schwartz v Olshan Grundman Frome & Rosenzweig, 302 AD2d at 198. Moreover, the damages claimed for legal malpractice must be "actual and ascertainable" resulting from the proximate cause of the attorney's negligence. Ressis v. Wojick, 105 A.D.2d 565, 567 (3d Dept 1984), lv. denied 64 N.Y.2d 609 (1985)

Plaintiffs cannot prove that "but for" defendants' advice they would have settled for less than $500,000. Specifically, there is no proof available that would show that the landlord would have discounted the rent in any amount, less a  specific amount, such as 41%. Moreover, contrary to plaintiffs' position any testimony by the landlord's representative would be insufficient to establish actual and ascertainable damages as he would be speculating as to what the landlord might  have done years earlier."

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Legal Malpractice Unavailing and Now Enjoined

Here is a case in which the attorney has successfully shut down plaintiff's case, plaintiff's future cases, and in general, plaintiff himself.  It's rare that defendant scores a victory so comprehensive.  The Appellate Division, and earlier, Justice Ling-Cohan in Banushi v Law Off. of Scott W. Epstein  2013 NY Slip Op 06930   Decided on October 24, 2013   Appellate Division, First Department    found plaintiff's case most unworthy.

"Notwithstanding the public policy requiring free access to the courts, the motion court's order barring plaintiff from initiating further litigation or motion practice against defendants without prior court approval unless he is represented by counsel was justified by plaintiff's continuous and vexatious litigation against defendants (Matter of Robert v O'Meara, 28 AD3d 567 [2d Dept 2006], lv denied 7 NY3d 716 [2006]; Capogrosso v Kansas, 60 AD3d 522 [1st Dept 2009], cert denied ___ US ___, 133 S Ct 278 [2012]; see also Melnitzky v Apple Bank for Sav., 19 AD3d 252, 253 [1st Dept 2005]). Among other things, in addition to the instant action, plaintiff filed a lawsuit in state court and a lawsuit in federal court and a counterclaim in a third suit, as well as a disciplinary complaint, all alleging legal malpractice based on the same sparse allegations, and all unavailing.

Contrary to plaintiff's contentions, the order is not overly broad; it granted the part of defendants' motion that sought injunctive relief only as to litigation against them. "

 

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How Many Legal Malpractice Cases Will Follow the Bello Resignation?

Thomas F. Bello, an attorney from Staten Island is well known, and had many many clients. This week his resignation and disbarrment was accepted by the Appellate Division, Second Department.  What is shocking is the number of clients who had made complaints against him, and how long it took to resolve the matter.  Matter of Bello   2013 NY Slip Op 06859   Decided on October 23, 2013   Appellate Division, Second Department   Per Curiam. is worth reading to see how many clients he let down. 
 

"PER CURIAM.The Grievance Committee for the Second, Eleventh, and Thirteenth Judicial Districts served a petition and supplemental petition on the respondent. Following a preliminary conference held on December 28, 2011, and a hearing conducted in nine separate sessions in 2012, the Special Referee sustained all six charges, concluding that the respondent "neglected the legal matters entrusted to him, . . . failed to adequately communicate with his clients, . . . failed to comply with court directives, and . . . failed to honor a stipulation to which he agreed." The Grievance Committee now moves to confirm the report of the Special Referee and for the imposition of such discipline as the Court deems just and proper. The respondent has now submitted an affidavit sworn to February 25, 2013, wherein he tenders his resignation as an attorney and counselor-at-law (see 22 NYCRR 691.9), and cross-moves for its acceptance, and the striking of his name from the roll of attorneys. In his affidavit, the respondent acknowledges, in essence, that he cannot successfully defend himself against the merits of the charges.

Charge one, as amended, alleges that the respondent engaged in a pattern of neglecting legal matters entrusted to him, in violation of former Code of Professional Responsibility DR 6-101(a)(3) and DR 1-102(a)(7) (22 NYCRR 1200.30[a][3]; 1200.3[a][7]). Between 2004 and 2010, [*2]the respondent was retained to represent 19 different clients, and thereafter failed to diligently pursue those matters with respect to each of them.

Charge two alleges that the respondent engaged in a pattern of failing to maintain adequate communications with his clients, in violation of former Code of Professional Responsibility DR 6-101(a)(3) and DR1-102(a)(7) (22 NYCRR 1200.30[a][3]; 1200.3[a][7]). Between in or about 2001 and 2010, the respondent was retained to represent 18 different clients, and thereafter failed to adequately respond to those clients' inquiries with respect to their cases.

Charge three alleges that the respondent failed to comply with numerous court directives, in violation of former Code of Professional Responsibility DR 1-102(a)(5) and (7) (22 NYCRR 1200.3[a][5], [7]). In or about December 2007, the respondent was retained to represent Tony Chin in a legal matter. In or about 2008, the respondent commenced an action on Mr. Chin's behalf, entitled Chin v U. S. Postal Service, in the United States District Court for the Eastern District of New York. Although twice directed by the court to provide it with a status letter/report, the respondent failed to do so. The respondent also failed to comply with two orders directing the plaintiff to file, inter alia, affidavits of proper service on the defendant on or before December 22, 2008. By order dated June 16, 2009, the court dismissed the action, in view of the respondent's "pattern of delay and inexplicable noncompliance."

Charge four, as amended, alleges that the respondent engaged in a pattern of neglecting legal matters entrusted to him. Between 1999 and 2010, the respondent was retained by five clients. Thereafter, the respondent failed to diligently pursue their legal matters, in violation of former Code of Professional Responsibility DR 6-101(a)(3) and DR 1-102(a)(7) (22 NYCRR 1200.30[a][3]; 1200.3[a][7]).

Charge five, as amended, alleges that the respondent engaged in a pattern of failing to maintain adequate communications with his clients. Between 1999 and 2010, the respondent was retained to represent six clients. Thereafter, the respondent failed to adequately respond to inquiries made by these clients with respect to their legal cases, in violation of former Code of Professional Responsibility DR 6-101(a)(3) and DR 1-102(a)(7) (22 NYCRR 1200.30[a][3]; 1200.3[a][7]).

Charge six alleges that the respondent failed to timely satisfy the terms of a settlement agreement, in violation of former Code of Professional Responsibility DR 1-102(a)(5) and (7) (22 NYCRR 1200.3[a][5], [7]). In or about 2008, the respondent was sued for legal malpractice in the Supreme Court, Richmond County, in a matter entitled Hayes v Bello. In or about February 2011, the respondent executed a settlement agreement, in which he agreed to pay the total sum of $25,000 to the plaintiff, as follows: "$5,000.00 within 90 days, and balance with [sic] 6 months thereafter." To date, the respondent has failed to satisfy the terms of the agreement.

The respondent acknowledges that his resignation is tendered freely and voluntarily, that he is not subject to coercion or duress, and that he is fully aware of the implications of its submission. He further acknowledges that the Court has the power to disaffirm the Special Referee's report or issue discipline that could range from a public censure, to suspension, or disbarment. Nonetheless, he requests that the Court accept his resignation and strike his name from the roll of attorneys.

 

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Plaintiff Unable to Show Proximate Cause

There are three (or perhaps four) elements of legal malpractice.  They are a departure from good and accepted practice, which proximately causes damage to plaintiff, "but for" which there would have been a better or different result, with ascertainable damages.  in Cobble Cr. Consulting, Inc. v Sichenzia Ross Friedman Ference LLP 2013 NY Slip Op 06820;  Decided on October 22, 2013 ; Appellate Division, First Department we see a decision which affirms dismissal on the basis that plaintiff cannot show how any negligence was the proximate cause of their damage. 
 

"The motion court properly dismissed the claim of legal malpractice, as plaintiffs failed to allege how any negligence was the proximate cause of their damages (see O'Callaghan v Brunelle, 84 AD3d 581, 582 [1st Dept 2011], lv denied 18 NY3d 804 [2012]; McLoughlin v Sullivan Papain Block McGrath & Cannavo, P.C., 18 AD3d 245, 246 [1st Dept 2005], lv denied 5 NY3d 709 [2005]). The motion court considered plaintiffs' allegations, quoted in its decision, that defendant acted in a manner contrary to its discussions with plaintiffs by assisting the subject corporation in eliminating the Preferred A shares. As the motion court noted, plaintiffs alleged only that the parties had discussed, and defendant failed to include, a provision in the Certificate of Designation that prevented changes in the common stock structure from affecting the conversion rate of plaintiffs' Preferred A Stock. Plaintiffs did not challenge the inclusion of language in the Certificate of Designation that allows changes in the value or voting rights of Preferred A shares by a majority vote of Preferred A shareholders. The complaint reveals that a vote held pursuant to this latter provision is what altered the conversion ratio, allegedly rendering plaintiffs' stock virtually worthless. Thus, inclusion of the anti-dilution provision plaintiffs cite would not have altered the result. Accordingly, plaintiffs failed to set forth facts showing that, but for defendant's conduct, plaintiffs would not have incurred any damages.

Plaintiffs further alleged, without elaborating, that defendant failed to advise them to seek independent counsel at any time. Plaintiffs failed to allege how this omission proximately caused their injuries. Any claim that independent counsel could have negotiated a provision prohibiting changes to the Certificate or any changes to the conversion ratio, even upon a majority vote, or could have insulated plaintiffs from incurring any losses upon a conversion, is speculative."

 

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Could This Case Turn Into a Rare Criminal Legal Malpractice Case?

Legal malpractice in the criminal defense sphere does not, for the most part, exist.  Under well settled Court of Appeals cases a criminal defendant may not successfully sue the criminal defense attorney for legal malpractice absent "actual innocence", which is generally defined as acquittal, reversal or exoneration.  Britt v. Legal Aid Socy, 95 NY2d 443 (2000) ; Carmel v. Lunney, 70 NY2d 169 (1987).  Here is case where plaintiff might make an appropriate showing.

InPeople v Clermont;  2013 NY Slip Op 06806;   Decided on October 22, 2013;  Court of Appeals  we see a case which might be one of the rare possible candidates, if the gun is suppressed on remand.
 

"Defendant was charged with weapon possession offenses after he was found in possession of a gun as a consequence of a street encounter with the police. Three days before the suppression hearing, his assigned counsel made an application to be relieved as counsel, stating that his associate had quit, he was overwhelmed with work and could not competently represent defendant. Counsel restated these concerns on the record before the hearing commenced and the court stated that the motion would be granted after counsel completed the hearing. Thereafter, the hearing ensued, the court denied suppression, new counsel was appointed and the case proceeded to trial where defendant was convicted of criminal possession of a weapon in the second and third degrees.

On appeal, defendant sought reversal of his conviction based on the ineffective assistance of his first attorney. The Appellate Division affirmed the judgment in a divided decision. The majority concluded that counsel's representation had not fallen below the constitutional standard but the dissent disagreed, reasoning that multiple errors by the attorney in relation to defendant's suppression application warranted remittal of the case to Supreme Court. The Appellate Division dissenter granted defendant leave to appeal to this Court.

We agree with the dissent that defendant is entitled to relief. In his written motion requesting a hearing, counsel misstated the facts relating to the arrest, indicating that defendant had been involved in a motor vehicle stop rather than a street encounter with police. At the suppression hearing, the attorney did not marshal the facts for the court and made no legal argument. This, coupled with his failure to make appropriate argument in his motion papers or to submit a post-hearing memorandum, meant that the defense never supplied the hearing court with any legal rationale for granting suppression. Moreover, after the court issued a decision describing the sequence of events in a manner that differed significantly from the testimony of the police officer (the only witness at the hearing) and was adverse to the defense, defendant's attorney made no motion to reargue or otherwise correct the court's apparent factual error. Counsel never ascertained whether the court decided the motion based on the hearing proof or a misunderstanding of the officer's uncontradicted testimony.

And this is not a case where any of these errors can be explained as part of a strategic design (assuming one could be imagined), given that defense counsel asked to be relieved, informing the court that he was unable to provide competent representation to defendant. Thus, although the attorney secured a hearing, his representation in relation to the application as a whole was deficient in so many respects — both before, during and after the proceeding — that defendant was not afforded meaningful representation at a critical stage of this [*3]prosecution. "

From the Rivera Dissent:

 

"Defendant was arrested and charged with criminal possession of a weapon. Prior to defendant's trial, counsel moved as part of an omnibus motion to suppress the weapon, a gun seized shortly after defendant's arrest. However, in that branch of defendant's omnibus motion that sought suppression of physical evidence, counsel recited a wholly different factual scenario from the events actually leading up to defendant's arrest and the seizure of the gun. Counsel incorrectly stated that police officers approached defendant while he was seated in an automobile, and that after they forcibly removed him from the vehicle, a gun fell out onto the ground. This was a complete fiction. The correct facts were that the officers had observed defendant walking on the street, arrested him after a chase on foot, and seized the gun from a [*4]private yard near where he was arrested. Additionally, because counsel's legal argument was based on these incorrect facts, he also failed to tailor the legal standards to the specifics of defendant's case. Although counsel's motion papers stated that he was "unaware of many of the relevant facts necessary to [his] preparation of the defense," and requested permission to submit a post-hearing memorandum, "so that [he] might more effectively represent the interests of [defendant]," he never filed such memorandum.

In order to justify police pursuit, the officers must have "reasonable suspicion that a crime has been, is being, or is about to be committed" (People v Holmes, 81 NY2d 1056, 1058 [1993]). Reasonable suspicion encompasses a "quantum of knowledge sufficient to induce an ordinarily prudent and cautious [person] under the circumstances to believe criminal activity is at hand" (People v Martinez, 80 NY2d 444, 448 [1992][citation omitted]). We have found that "[f]light, combined with other specific circumstances indicating that the suspect may be engaged in criminal activity, could provide the predicate necessary to justify pursuit" (Holmes, 81 NY2d at 1058). "Flight alone, however, or even in conjunction with equivocal circumstances that might justify a police request for information is insufficient to justify pursuit" (id.[citations omitted]).

Nearly two decades ago, in a case on all fours with the present appeal, we held that flight in combination with a defendant grabbing at his waistband, "does not support a determination that the officers had reasonable suspicion to pursue defendant" (see People v Sierra, 83 NY2d 928, 930 [1994]). In Sierra, we found no reasonable suspicion to pursue a fleeing defendant where "the officers knew only that, after exiting from the back seat of a livery cab that had been stopped for defective brake lights, defendant grabbed at his waistband" (id. [emphasis added]).


Years later, we reiterated that flight must be accompanied by other suggestive conduct in order to support reasonable suspicion justifying a seizure (People v Pines, 99 NY2d 525,526 [2002][citing Martinez, 80 NY2d at 447-48]). In Martinez, we acknowledged that the "[d]efendant had a right to refuse to respond to a police inquiry and his flight when officers approached could not, in and of itself, create a reasonable suspicion of criminal activity" (id. at 448 [citation omitted]). Only after aggregating other compelling circumstances—namely that defendant was observed "removing an instrument known to the police to be used in concealing drugs"—did we find reasonable suspicion (id.) "


 

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When Might Their Lawyer be Your Lawyer?

Mr. San LLC v Zucker & Kwestel LLP ; 2012 NY Slip Op 32119(U);  Sup Ct, Nassau County Docket Number: 601065/11;  Judge: Stephen A. Bucaria is an interesting example of the "whose lawyer is it" question that frequently arises in the formation of new businesses.

"This is an action for aiding and abetting fraud. Plaintiffs invested substantial amounts of money with Gershon Barkany who held himself out as a financial advisor and real estate investor. Plaintiffs allege that Barkany represented that the money was to be used to fund real estate loans and other investments but Barkany was actually running a Ponzi scheme. Plaintiffs further allege that Barkany presented defendants Zucker & K westel LLP and Steven K westel as his attorneys in connection with the sham real estate transactions, and the firm accepted wire transfers of plaintiffs ' funds into its escrow account."

"Absent fraud, collusion, malicious acts, or other special circumstances, an attorney is not liable to third parties, for harm caused by professional negligence, unless there is a relationship sufficiently approaching privity between the attorney and the alleged client Schneider v Finman 15 NY3d 306 309 (2010)). This rule protects attorneys from legal malpractice suits by indeterminate classes of plaintiffs whose interests may be at odds with the interests of the acknowledged client (Id). Since an attorney-client relationship does not depend upon a formal retainer agreement or upon payment of a fee, the court must look to the words and actions of the parties (Moran v Hurst 32 AD3d 909, 911 (2d Dept 2006)). The unilateral belief of a plaintiff alone does not confer upon him or her the status of a client (Id). Plaintiffs allege that Barkany presented defendants as his attorneys, rather than the attorneys for the plaintiffs. An attorney for an organization is not the attorney for its members (Professional Conduct Rule 1. 13). However, it appears that no company had been formed at the time that plaintiffs made their investment. At the time that plaintiffs invested
their funds, their interests seemed aligned with Barkany , at least as to the expected profitability of the venture. Moreover, the fact that Kwestel borrowed money from Barkany suggests that there may have been collusion between client and attorney and perhaps even knowledge on Kwestel' s part as to Barkany s fraud upon the plaintiff. In these circumstances, the court must give plaintiffs the benefit of the possible favorable inference that an attorney-client relationship arose when defendants accepted plaintiffs ' money into their escrow account. Defendants' motion to dismiss plaintiffs ' malpractice claim for a defense founded upon documentary evidence and failure to state a cause of action is denied. Fiduciary liability is not dependent solely upon an agreement, but results when one of the parties is under a duty to act for or give advice for the benefit of the other upon matters within the scope of the relationship EBC I, Inc v Goldman Sachs 5 NY3d 11 , 19-
(2005)). An attorney for a limited liability company may have a fiduciary duty towards an individual member, at least with respect the member s share of distributions of the company's profits Kurtzman v Burgol 40 AD3d 588 (2d Dept 2007)). As noted, it appears that no company had been formed at the time that plaintiffs made their investment. Nevertheless, having accepted plaintiffs ' money into escrow , defendants may have had a fiduciary duty to make sure that the funds were applied to the real estate investment. Defendants' motion to dismiss plaintiffs ' breach of fiduciary duty claim for a founded upon documentary evidence and failure to state a cause of action is denied."
 

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A Large Amount of Money is Lost. Will Legal Malpractice Claims Follow?

We saw Margin Call.       Dexia SA/NV v Morgan Stanley  013 NY Slip Op 51696(U); Decided on October 16, 2013; Supreme Court, New York County; Bransten, J. is the litigation that might have followed the events in Margin Call.

Admittedly there is no legal malpractice claim in Dexia.  We wonder what will happen now that the Court has determined that the assignment of certificates in this mega multi-million dollar transaction laced the right to sue for fraud. 

"n this action for common-law fraud, aiding and abetting fraud, and fraudulent inducement, defendants Morgan Stanley ("MS"), Morgan Stanley & Co., Inc. ("MS & Co."), Morgan Stanley ABS Capital I Inc. ("MSAC"), Morgan Stanley Capital I Inc. ("MSC"), Morgan Stanley Mortgage Capital Inc. ("MSMC"), and Morgan Stanley Mortgage Capital Holdings LLC bring the instant motion to dismiss the amended complaint, pursuant to CPLR 3211. Defendants contend that plaintiffs lack standing to bring fraud claims and that plaintiffs have not pled the requisite elements to state a cause of action sounding in fraud. Plaintiffs FSA Asset Management LLC ("FSAM"), Dexia SA/NV, Dexia Holdings, Inc. ("DHI"), and Dexia Crédit Local SA ("DCL") oppose the motion.

[*2]I.Background

This action concerns 29 residential mortgage-backed securities ("RMBS"), which FSAM purchased from MS & Co in 2006 and 2007, for a total of $626 million. On June 30, 2009, FSAM assigned the securities to Dexia SA/NV, DHI, and DCL for face value, via a put option transaction. By the time this instant action was filed, all 29 RMBS at issue had been downgraded to "junk" status.

Investors in RMBS receive payments from the cash flow generated by thousands of mortgages, which have been deposited into designated pools. The actual securities held by the investor are pass-through participation certificates, which are an ownership interest in the issuing trust, the entity that holds the pools.

The first step in the securitization process is the creation of a pool of designated mortgages by the sponsor. The mortgages can be originated by the sponsor itself, purchased from other financial institutions, or be a mixture of self-originated and purchased loans. Before creating the pool, the sponsor reviews a sample of the mortgages in order to verify that they comport with underwriting guidelines.

After the pool of designated mortgages has been created by the sponsor, the mortgages are transferred to the depositor. The depositor carves up the projected cash flow from the mortgages into tranches; the tranches are ordered by seniority on the basis of risk, thus, any losses in the loan pool are applied to the junior (riskiest) tranches first. Once the tranche structure has been finalized, the proposed security is sent to rating agencies for evaluation. Next, the depositor transfers the mortgage pool to the issuing trust, which issues participation certificates for each tranche. The issuing trust then conveys the participation certificates to the depositor as consideration for the mortgages.

Once the depositor is in possession of the participation certificates, the underwriter will begin marketing the RMBS to potential investors, providing them with free writing prospectuses and term sheets. The depositor then transfers the certificates to the underwriter, who will sell them to investors and remit the proceeds to the depositor, minus underwriting fees.

In this action, MS & Co. underwrote and sold all the RMBS in dispute, MSMC was the sponsor of 15 of the 21 securitizations, MSAC served as depositor for 17 of the securitizations, and MSC served as depositor for three of the securitizations.

Plaintiffs allege they were fraudulently induced into purchasing the RMBS by defendants. Specifically, plaintiffs allege defendants misrepresented the due diligence and underwriting standards on the underlying mortgages, misrepresented the loan to value ("LTV") ratios of the mortgaged properties, and misrepresented the debt to income ("DTI") ratios of the borrowers. Plaintiffs further contend that defendants misrepresented the risks associated with the RMBS in general, and made misrepresentations to rating agencies, resulting in artificially high ratings. Plaintiffs assert that in reliance on defendants' misrepresentations, they were damaged by paying far more for the RMBS than they were worth. Plaintiffs pray for compensatory, rescissory and punitive damages, as well as costs and expenses incurred in this action. "

"Furthermore, plaintiffs' own pleadings contradict their assertion that FSAM intended to assign fraud claims, in that they allege that "[t]he Dexia Plaintiffs could not have uncovered Morgan Stanley's fraud until 2011, at the earliest, regardless of the amount of due diligence that they performed." (Am. Compl. ¶ 259.) It is unclear how FSAM could have intended to convey fraud claims of which it was not aware, and were not discoverable for a year and a half after the assignment. "It is manifest that the plaintiff did not intend to assign the cause of action . . . because neither at the time of the assignment, nor of the execution of the conveyance, had the plaintiff discovered the fraud." Fox, 157App. Div. at 368. If FSAM had intended to assign fraud claims which they had not yet discovered, it could have included express language to that effect.

The court concludes that FSAM did not assign fraud claims to assignee-plaintiffs Dexia SA/NV, DHI and DCL; to the extent any fraud claims exist, they remain with FSAM alone. "

"In an action for fraud, "[t]he true measure of damage is indemnity for the actual pecuniary loss sustained as the direct result of the wrong or what is known as the out-of-pocket' rule." Lama Holding Co. v. Smith Barney, 88 NY2d 413, 421 (1996) (internal quotation marks and citations omitted). "Damages are to be calculated to compensate plaintiffs for what they lost because of the fraud, not to compensate them for what they might have gained." Id. FSAM sustained no losses on the RMBS it purchased; it received exactly the purchase price upon the sale to the Dexia plaintiffs. There is also no allegation that pass-through payments due to FSAM as holders of the participation certificates were missed. To the extent FSAM did receive pass through payments, the RMBS were profitable to them, and there can be no claim of damages. See Jung Hing Leung v. Lotus Ride, 198 AD2d 155, 156 (1st Dep't 1993).

Even if the court is to accept as true that there have been material misrepresentations, scienter, and justifiable reliance by FSAM, without damages, the claims must be dismissed. [*6]Deception without damages is not actionable, nor is deception, in and of itself, a legally cognizable injury. Small v. Lorillard Tobacco Co., 94 NY2d 43, 56-57 (1999). "


 

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Waiting Too Long In a Legal Malpractice Case

While one might expect that this article is about a statute of limitations question, it is about both moving too fast and waiting too long in a motion for summary judgment.  Imagine the tensions that exist for defense counsel in legal malpractice litigation.  They want the case to end, yet, must amass enough evidence to support a motion.  They want to save legal fees in the defense, yet must spend money to win.  Beyond that, there is a one-summary judgment rule.  You may not move over and over for summary judgment.  What is one to do?

Vinar v Litman 2013 NY Slip Op 06675  Decided on October 16, 2013  Appellate Division, Second Department  is an example of moving too fast (prior to Plaintiff's deposition) and waiting too long (the one motion rule.)
 

"The plaintiff commenced this action alleging, inter alia, legal malpractice, fraud, and conversion. The defendants Honig, Mongioi, Monahan and Sklavos LLP, Edward H. Honig, Robert Anthony Monahan, Mary E. Mongioi, Alexander E. Sklavos, Monahan & Sklavos, P.C., and Alexander E. Sklavos, P.C. (hereinafter collectively the attorney defendants) moved for summary judgment dismissing the complaint insofar as asserted against them. The Supreme Court concluded that their motion for summary judgment constituted their second motion for that relief, and denied it on the ground that they failed to identify the specific new evidence or sufficient cause that would justify the making of a successive summary judgment motion. On appeal, the attorney defendants contend, inter alia, that the court erred in denying their motion since their second summary judgment motion was premised on new evidence that was unavailable at the time of their initial motion.

"Generally, successive motions for summary judgment should not be entertained, absent a showing of newly discovered evidence or other sufficient cause" (Sutter v Wakefern Food Corp., 69 AD3d 844, 845; see Coccia v Liotti, 101 AD3d 664, 666; Powell v Trans-Auto Sys., 32 AD2d 650; Levitz v Robbins Music Corp., 17 AD2d 801). Although, in this context, newly discovered evidence may consist of "deposition testimony which was not elicited until after the date of a prior order denying an earlier motion for summary judgment" (Auffermann v Distl, 56 AD3d 502, 502; see Coccia v Liotti, 101 AD3d at 666; Alaimo v Mongelli, 93 AD3d 742, 743; Staib v City of New York, 289 AD2d 560), such evidence is not "newly discovered" simply because it was not submitted on the previous motion (Sutter v Wakefern Food Corp., 69 AD3d at 845). Rather, the evidence that was not submitted in support of the previous summary judgment motion must be used [*2]to establish facts that were not available to the party at the time it made its initial motion for summary judgment and which could not have been established through alternative evidentiary means (see Pavlovich v Zimmet, 50 AD3d 1364, 1365; Capuano v Platzner Intl. Group, 5 AD3d 620, 621; Rose v La Joux, 93 AD2d 817, 818; Graney Dev. Corp. v Taksen, 62 AD2d 1148, 1149; Harding v Buchele, 59 AD2d 754, 755; Abramoff v Federal Ins. Co., 48 AD2d 676; Powell v Trans-Auto Sys., 32 AD2d 650). Indeed, "successive motions for summary judgment should not be made based upon facts or arguments which could have been submitted on the original motion for summary judgment" (Capuano v Platzner Intl. Group, 5 AD3d at 621; see Harding v Buchele, 59 AD2d at 755).

Here, contrary to the contention of the attorney defendants, the plaintiff's deposition testimony did not constitute newly discovered evidence. Although the plaintiff's deposition was elicited after the prior summary judgment motion was denied, the purported new facts established by the plaintiff's deposition testimony could have been asserted by the attorney defendants in support of their previous motion. The purported new facts pertained to matters about which the individual attorney defendants had personal knowledge, and could have been established through alternative evidentiary means..."
 

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What May Plaintiff's Attorney Do in Response to an Arons Interview Request?

While not exactly legal malpractice-centric, the question of how plaintiff's and defendant's attorneys prepare for a medical malpractice case does touch on whether either is departing from good and accepted practice of law. 

The dispute is easily set forth.  Under Arons v. Jutkowitz,  9 NY3d 393 (2007), Defense counsel were permitted private interviews with treating physicians.  Plaintiffs were required to provide HIPPA authorizations permitting the interviews.

In Charlap v Khan  2013 NY Slip Op 23349   Decided on October 11, 2013  Supreme Court, Erie County  Curran, J. plaintiff's attorney wrote to the doctors in an attempt to mitigate the effects of a private conversation between defense counsel and the physician.  Plaintiff's attorney wrote: "I am writing to you regarding a lawsuit that has been commenced on behalf of my late wife, Lisa Charlap, which is listed above. The attorneys for the defendants in this lawsuit have indicated that they intend to contact you, and will attempt to meet with you to discuss the medical treatment you have provided, and perhaps other issues that relate to this lawsuit.
Although I am required to provide these defense lawyers with a written authorization permitting them to contact you, the law does not obligate you in any way to meet with them or talk with them. That decision is entirely yours. If you decide to meet with their lawyers, I would ask that you let me know, because I would like the opportunity to be present or to have my attorneys present."

is this permissible?  Is it a departure from good practice for a plaintiff's attorney not to send such a letter? 

Supreme Court, in this case, held: "Arons did not establish a common law right to conduct a private interview of a non-party witness. To insist that plaintiff's counsel not request of a witness to be present at defense counsel's interview is to assert that a plaintiff has a duty to forbear from doing so. Arons did not impose any such duty. Further, any insistence that plaintiff's counsel has such a duty is the equivalent of demanding that plaintiff's counsel forebear from representing his or her client with "competence" (Rule 1.1) and "diligence" (Rule 1.3), as required by the Rules. The assertion of one person's legal right in a court of law should be understood in the adversarial process as ordinarily limiting the rights of the adverse party or imposing a duty thereon. Arons did no such thing in merely indicating that an attorney "may" conduct interviews.

For these reasons, this Court concludes that Arons did not create a "right" to conduct private interviews of non-party witnesses.[FN6] The absence of such a "right" does not, however, mean that the process of non-party witnesses being interviewed by attorneys is without boundaries."

"The Court concludes that the letter which is the subject of this motion does not cross the boundaries set by the Rules. The letter does not advise the witness to do anything [*13]improper under the Rules. It does not even express a preference that the witness not meet with the adversary, which in any event would be permissible under Op. 2009-5. Rather, at most, it is a request to be present during an interview, a request which may or may not be honored by the witness. For these reasons, the Court denies the motions but declines to opine at this time as to whether the letter may be used for credibility purposes during cross examination of the plaintiff (see e.g. David B. Harrison, Annotation, Admissibility and Effect, on Issue of Party's Credibility or Merits of His Case, of Evidence of Attempts to Intimidate or Influence Witness in Civil Action, 4 ALR 4th 829). "

 

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Judiciary Law 487, Sexual Abuse and Advocacy

A shockingly large number of educational institutions in New York and all over the country are now facing their history of teacher-student sexual abuse.  Horace Mann, Brown & Nichols, Poly Prep.  Each have had their past investigated, and in many instances come up short. 

What of the law firms that represented these schools?  Are they responsible for wrongful acts, especially in the nature of deceit?  If they forcefully defended the schools, can they now be held to have violated Judiciary Law 487?

In Zimmerman v. O'Melveny & Myers, LLP we see the competing arguments.  As reported in today's New York Law Journal, by Andrew Keshner  " O'Melveny & Myers, fighting to dismiss a state suit brought by alumni of an elite Brooklyn prep school that was represented by the firm in a prior federal action, said the alumni cannot sue the firm with "previously abandoned" claims of purported deception on the courts.

In December, 10 Poly Prep Country Day School alumni and two former summer camp participants settled a closely-watched Eastern District lawsuit stemming from alleged decades of abuse by the school's football coach, Philip Foglietta, now deceased, and the school's concealment of the actions.

Less than a year after the confidential settlement, many of the same plaintiffs sued O'Melveny and Jeffrey Kohn, the New York managing partner, in Manhattan Supreme Court. Pointing to state Judiciary Law §487—which forbids attorneys' "deceit or collusion, with intent to deceive the court or any party"—the alumni said the defendants should be held accountable for "their grievous and oft-repeated falsehoods" when defending the school in the federal suit (NYLJ, Aug. 15)."

""After settling an earlier federal court litigation on confidential terms, Plaintiffs are now seeking more money by bringing a new action in which they repeat spurious allegations that the defense lawyers made 'misrepresentations' in the earlier action. Plaintiffs made—and then voluntarily abandoned—the identical allegations in the earlier federal proceedings. Plaintiffs' improper attempt to revive in a new action the allegations they previously abandoned fails as a matter of law for several reasons," O'Melveny said in Zimmerman v. Kohn, 652826/2013."

 

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The Death of a Legal Malpractice Case

We often wonder whether legal malpractice cases are subject to a higher form of scrutiny, although it may also be true that mistakes are more often made by attorneys in their worst (underlying) cases.  In any event sometimes a legal malpractice case goes to the jury on the real question of whether plaintiff could have prevailed in the underlying case (the "but for" issue) and sometimes the legal malpractice case is ended at the motion stage. Here is one that was ended early.

Magidson v Badash ; 2012 NY Slip Op 00935 ;  Appellate Division, Second Department is a legal malpractice case in which the underlying matter remains undescribed. The legal malpractice suffered from infirmities in the underlying case, and failed the "but for" problem.
 

"The complaint failed to state a cause of action to recover damages for legal malpractice because the plaintiff neglected to plead that she would have prevailed in the underlying action, commenced in the Supreme Court, New York County, but for the defendants' alleged malpractice in failing to file certain motions and appeal from certain orders issued in that action (see Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442; Kuzmin v Nevsky, 74 AD3d 896, 898; see also Weiner v Hershman & Leicher, 248 AD2d 193).

Moreover, the Supreme Court providently exercised its discretion in denying the plaintiff's cross motion for leave to amend the complaint, as the proposed amendment was patently devoid of merit. The Appellate Division, First Department, concluded that the complaint in the underlying action was properly dismissed because the plaintiff commenced that action after the applicable statute of limitations had expired (see Magidson v Otterman, 57 AD3d 264, 264), and the proposed amendment, which did not include allegations that the defendants committed malpractice by failing to timely commence the underlying action, would not alter that result (see Matter of New York County DES Litig., 89 NY2d 506, 514; Byrd v Manor, 82 AD3d 813, 815).

 

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An Arbitration, A Falling Out of Attorneys, Legal Malpractice Litigation

Two mega law firms work together to present the case of an attorney against his former partnership. The arbitration goes badly, expert witnesses are precluded and the award is not good for plaintiff.  Shortly thereafter law firm 1 starts a legal malpractice action against law firm 2.  Needless to say, relations between them do not proceed smoothly.

Roberts v Corwin   2013 NY Slip Op 51637(U)   Decided on October 3, 2013   Supreme Court, New York County   Friedman, J. illustrates the fall-out after unsuccessful litigation. 
 

"Mr. Roberts retained Greenberg Traurig to represent him in an arbitration against the firm he founded, Roberts & Finger, LLP. The arbitration panel issued an adverse interim award on May 11, 2006, finding that Mr. Roberts "failed to establish a prima facie case [*2]that he has suffered any damage as a result of the manner in which the dissolution of Rogers & Finger LLP was carried out." (Interim Award, ¶ 10.) The panel's determination was based in pertinent part on Mr. Roberts' failure to present expert testimony as to the value of the law firm and its assets. (Id., ¶¶ 8, 9, 10.) Mr. Roberts retained Epstein Becker to serve as co-counsel to Greenberg Traurig in the arbitration in May 2006, after the panel's issuance of the interim award. (May 2012 Decision at 19.) The panel issued an adverse final award on July 13, 2006, incorporating the interim award. (Final Award.) Mr. Roberts' petition to vacate the unfavorable final award was denied by order of this Court (Moskowitz, J.), dated April 3, 2007. (Sept. 2012 Decision at 4.) Mr. Roberts ultimately reached a global settlement with Roberts & Finger in August 2007. (Sept. 2012 Decision at 24; Complaint, ¶ 55.)

Shortly after the issuance of the adverse interim award, and while Epstein Becker, through Mr. Cozier, was co-counseling with Greenberg Traurig to obtain relief from the award, Mr. Roberts consulted with John Sachs, also an attorney at Epstein Becker, regarding a possible malpractice action against Greenberg Traurig.[FN1] Although the parties dispute the date as of which Epstein Becker was retained for the malpractice action, it is undisputed that Mr. Roberts consulted with Mr. Sachs as early as May 2006, and that a formal demand was not served until October 2007.[FN2] This demand, made by letter dated October 18, 2007 (Sachs Aff., Ex. 1), asserted that the arbitrators precluded expert testimony on the valuation of Mr. Roberts' partnership interest based on Greenberg Traurig's failure to disclose that it would call an expert, and that such failure constituted malpractice. This malpractice action was filed on October 30, 2009, and was also based on Greenberg Traurig's failure to disclose the expert witness.

Greenberg Traurig contends that Epstein Becker misused its position as co-counsel "to build a record against [Greenberg Traurig] to support a purported malpractice claim." (Ds.' Memo. of Law in Support at 15.) In support, Greenberg Traurig cites Mr. Corwin's testimony that he "disclosed to [Epstein Becker] and Cozier, without reservation of any kind, as I would to any of my own colleagues at [Greenberg Traurig], or to any other qualified lawyer selected by Roberts to be my co-counsel, all information that would be helpful to them in understanding the background of the case and, in particular, all aspects of the underlying arbitration." (Corwin Aff., ¶ 17.) "

"As previously noted, Epstein Becker's simultaneous representation of Mr. Roberts for purposes of both mitigating damages in the arbitration proceeding and preparing for a possible malpractice action raises ethical concerns. (See May 14, 2012 Tr. at 25-26.) However, this case does not involve the egregious conduct in obtaining confidential information through deceptive means, or an inherent conflict of interest, which has been held to require the severe remedy of disqualification.

Greenberg Traurig also relies on alleged violations of the ethical rules governing attorney conduct (22 NYCRR 1200.0) to buttress its claim that Mr. Roberts' complaint should be dismissed or Epstein Becker disqualified as his attorney. (Ds.' Memo. in Support at 18-21.) Rule 4.3, which Greenberg Traurig cites, provides that a lawyer shall not "state or imply that the lawyer is disinterested" when communicating with a person who is not represented, or give legal [*4]advice to that person. Rule 8.4 (c) and its predecessor, Disciplinary Rule 1-102, also prohibit dishonest and deceitful conduct. The court credits Greenberg Traurig's claim that Rule 4.3, which did not exist at the time of Epstein Becker's alleged misconduct, is consistent with a lawyer's " general obligation not to engage in conduct involving dishonesty, deceit, fraud, or misrepresentation.'" (Reply Memo. Of Law at 12 [quoting Roy D. Simon, Simon's New York Rules of Professional Conduct Annotated at 850 [2012]].) The court finds, however, that Rule 4.3 is not applicable to the co-counseling relationship. Rule 8.4 (c) also is not implicated because this case does not involve the type of egregious conduct that has been held to warrant disqualification or sanctions. The court further rejects Greenberg Traurig's claim that Epstein Becker violated Rule 3.1 (a) which provides that a lawyer shall not bring or defend a frivolous claim. Epstein Becker has not engaged in frivolous conduct by arguing in the arbitration proceeding that the panel should not have rejected Mr. Roberts' damages evidence, while now arguing in this malpractice action that Greenberg Traurig committed malpractice by not noticing an expert on damages. "

 

 

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Court of Appeals Re-Invigorates Dombrowski

In a decision about liability for negligent drug testing, Landon v Kroll Lab. Specialists, Inc.  2013 NY Slip Op 06597  Decided on October 10, 2013  Court of Appeals, Ch. J/   Lippman took time to restate the policy rationale for Dombrowski v. Bulson, 19 NY3d 347(2012).
 

In Landon, plaintiff "commenced this action alleging that Kroll had issued the report reflecting the positive test result both negligently and as part of a policy of deliberate indifference to his rights. The basis for his claim was that the screen test cutoff level employed by Kroll was substantially lower than that recommended by Orasure or by federal standards and that Kroll failed to disclose those differences in its report. As alleged in the complaint, the screen test cutoff level recommended by Orasure is 3.0 ng/ml and the level recommended by the United States Department of Health and Human Services Substance Abuse and Mental Health Services Administration (SAMHSA) is 4.0 ng/ml —- both of which are substantially lower than the 1 ng/ml used by Kroll. The complaint further stated that, despite applicable New York State [*3]Department of Health Laboratory Standards requiring samples to be subject to confirmatory testing through the use of gas chromatography-mass spectronomy, Landon's sample was not subject to any type of confirmation test before defendant reported a positive result. In addition, the complaint alleged that proposed revisions to SAMHSA guidelines contemplated requiring the taking of a urine sample, contemporaneous with the oral fluid sample, in order to protect federal workers from inaccurate results. The complaint maintained that Kroll knew of, and failed to disclose, the potential for false positive THC readings when oral fluid samples were tested without a simultaneous urine sample. Moreover, plaintiff alleged that the VOP petition was the result of systemic negligence in Kroll's substance abuse testing practices. He asserted that he was required to serve an extended term of probation, thereby suffering a loss of freedom, as well as emotional and psychological harm, and monetary loss in the form of attorneys' fees expended in defense of the VOP petition."
 

Of interest in legal malpractice, Judge Lippman went on to explain why defendants were wrong to rely upon Dombrowski.  "Defendant places too much weight upon our recent decision in Dombrowski v Bulson (19 NY3d 347 [2012]), characterizing it as holding that loss of freedom damages are not recoverable in negligence actions. In that case, we found that a legal malpractice action did not lie against a criminal defense attorney to recover nonpecuniary damages. The decision was based in part on policy considerations, including the potentially devastating consequences such liability would have on the criminal justice system and, in particular, the possible deterrent effect it would have on the defense bar concerning the representation of indigent defendants (see Dombrowski, 19 NY3d at 352). Similar policy considerations do not weigh in defendant's favor here. "
 

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How A Legal Malpractice Case Can Fail

In Eighth Ave. Garage Corp. v Kaye Scholer LLP 2012 NY Slip Op 02402  Appellate Division, First Department Kaye Scholer defended itself, and obtained dismissal. Schwartz & Ponterio were unable to save the case for plaintiff.
 

The Court held that "Plaintiffs failed to allege facts in support of their claim of legal malpractice that "permit the inference that, but for defendants' [alleged negligence], [they] would not have sustained actual, ascertainable damages" (Pyne v Block & Assoc., 305 AD2d 213 [2003]). Although they maintain that as a result of defendants' negligence in failing to obtain an estoppel certificate from the landlord of the premises where the garage is located, they were unable to sell the subject parking garage, they failed to demonstrate that they would have sold the subject garage but for defendants' alleged malpractice. In any event, plaintiffs are precluded by the doctrine of collateral estoppel from litigating the issue of whether the landlord's failure to give them the certificate damaged them, as that issue was raised and decided against plaintiff Eighth Avenue Garage Corporation in a prior proceeding (Eighth Ave. Garage Corp. v H.K.L. Realty Corp., 60 AD3d 404 [2009], lv dismissed 12 NY3d 880 [2009]; see Hirsch v Fink, 89 AD3d 430 [2011]).

Supreme Court properly considered the evidence submitted on the motion, including the e-mails, which conclusively disposed of plaintiffs' claims (see Pitcock v Kasowitz, Benson, Torres & Friedman LLP, 74 AD3d 613 [2010]). Accordingly, it is of no moment that discovery has not been conducted. In addition, plaintiffs have not asserted that facts essential to justify [*2]opposition to the motion may have existed but could not be stated (see CPLR 3211[d]). "


 

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There Are Differences Between Accountants and Attorneys

Attorneys are subject to a triumvirate of claims, which may generally be: legal malpractice in tort, legal malpractice in contract and breach of fiduciary duty. Attorneys are fiduciaries of their clients, but interestingly, accountants (even CPAs) are not. In Knockout Vending Worldwide, LLC v Grodsky Caporrino & Kaufman CPA's, P.C. 2012 NY Slip Op 31855(U) Supreme Court, Suffolk County Judge: Elizabeth H. Emerson we see the distinction.

In this case business buyers claim they were defrauded when business sellers artificially inflated the value of the business through fraud. They sue sellers, sundry others, and their CPAs whom they say were hired to do the due diligence on the value of the business.

"Turning to the motion by the Kauman defendants to dismiss the second cause of action, according the plaintiffs the benefit of every possible favorable inference as a general rule, the plaintiffs have failed to state a second cause of action alleging a breach of fiduciary duty. TheCourt notes that the plaintiffs have alleged a cause of action for accounting malpractice. The existence of negligence claims, however, docs not create a fiduciary relationship between the Kaufman defendants and the plaintiffs (Friedman v Anderson, 23 AD3d 163). In general, there is no fiduciary relationship between an accountant and his client (DG Liquidation, Inc. v Anchin, Block & Anchin, 300 AD2d 70). "A conventional business relationship, without more, does not become a fiduciary relationship by mere allegation" (Friedman v Anderson, supra at 166, Oursler v Women's Interart Center, Jnc., 170 AD2d 407, 408). Here, the complaint alleges that the Kaufman defendants were the plaintiffs' personal accountants, and that the plaintiffs placed confidence in the Kaufman defendants' advice and opinions as professional accountants, consultants and advisors. However, while providing financial advice may be within the scope or an accountant's duties, and so within the definition of a conventional business relationship, the standard that plaintiffs must meet to sustain a cause of action for breach of fiduciary duty has not been met (Staffenberg v Fairfield Pagma Assoc., L.P., 2012 NY AppDiv LEXIS 3423, citing Friedman v Anderson, supra at 166; ef Lavin v Kaufman, Greenhut, Lebowitz & Forman, 226 AD2d 107). Accordingly, the Kaufman defendants' motion to dismiss the second cause of action is granted."
 

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A Cautionary Tale in Legal Malpractice

Attorneys make mistakes. Sometimes mistakes are fixed, sometimes not. Rarely do attorneys go to the length of fabricating complaints, making up stories of ongoing litigation and then running away from the disciplinary committee. We don't know what defense the attorney might offer, but this tale is both sad and shocking. The attorney in Matter of Gold; Grievance Committee for the Tenth Judicial District ; Motion No: 2011-06543 ; Slip Opinion No: 2012 NY Slip Op 61346(U)
; Appellate Division, Second Department, Motion Decision is now suspended.
 

"We find, prima facie, that the respondent is guilty of professional misconduct immediately threatening the public interest based upon his failure to cooperate with the lawful demands of the Grievance Committee for the Tenth Judicial District (hereinafter the Grievance Committee), with respect to its investigation of one complaint of professional misconduct.

On or about December 6, 2010, the Grievance Committee received a complaint against the respondent submitted by Paul Niehaus, on behalf of his client, David Goldstein. The complaint alleged that the respondent represented Mr. Goldstein in a matter entitled Goldstein v Massachusetts Mutual Insurance Company, commenced in the Supreme Court, New York County, under Index No. 113804/99. Mr. Goldstein, the plaintiff, sought, inter alia, declaratory relief that "the requirement in his disability policy that he be under a doctor's care and that monthly reports be submitted be deemed waived by defendant." By order dated May 3, 2000, the Supreme Court dismissed the complaint.

On or about February 2, 2005, the respondent commenced another action entitled Goldstein v. Massachusetts Mutual Insurance Company, in the Supreme Court, New York County, under Index No. 2515/05. The verified complaint, dated February 1, 2005, sought a declaratory judgment based, in sum and substance, on the same allegations previously alleged. By order dated August 22, 2005, the court found that the action was barred based on res judicata, as well as the applicable statute of limitations, and the matter was dismissed.

From in or about 2001 through in or about 2006, the respondent allegedly engaged in misleading and deceitful conduct by permitting his client, David Goldstein, to believe that the respondent had commenced a new action on Mr. Goldstein's behalf in 2001 (hereinafter the purported 2001 action) when, in fact, no new action had been commenced after dismissal of the first action until the commencement of the 2005 action. In response to an inquiry from David Goldstein regarding the purported 2001 action, the respondent, on or about October 29, 2004, forwarded to him copies of a purported amended summons and a purported amended verified complaint, dated November 3, 2003, and on or about January 6, 2006, forwarded to him copies of a purported summons and a purported verified complaint, dated February 12, 2001. None of those pleadings were filed. In response to another inquiry from David Goldstein regarding the purported 2001 action, the respondent, on or about May 3, 2006, forward to him copies of a purported notice of deposition and a purported verified answer, dated April 27, 2001, allegedly submitted by Michael Yoelli, of, Assail & Yoelli, LLP, on behalf of Massachusetts Mutual Insurance Company. Neither the purported notice of deposition, nor the purported verified answer, had been created, prepared or served by Michael Yoelli.

Based on the foregoing, David Goldstein commenced an action against the respondent, on or about December 20, 2006, entitled Goldstein v Gold, in the United States District Court for the Eastern District of New York, under Index No. CV-06-6707, alleging, inter alia, that the respondent had engaged in fraud and legal malpractice. In a Final Judgment by Consent dated November 4, 2010, the respondent consented to the entry of a judgment against him in the amount of $250,000.

By letter dated December 13, 2010, mailed to 5535 42nd Terrace, Vero Beach, Florida 32967 (the business address listed for the respondent with the Office of Court Administration at that time), the Grievance Committee asked the respondent to submit a written answer to the Goldstein complaint. By letter dated December 27, 2010, the respondent submitted an answer and response to a background questionaire. The answer contained another address for the respondent, to wit, P.O. Box 700148, Wabasso, Florida 32970, and the background questionnaire stated that the respondent's home address was 5535 42nd Terrace, Vero Beach, Florida 32970.

The respondent has neither opposed the Grievance Committee's motion nor submitted a any response relative thereto."


Based upon the foregoing, the motion is granted, the respondent is immediately suspended from the practice of law, pursuant to 22 NYCRR 691.4(l)(1)(i), pending further order of this Court, the Grievance Committee is authorized to institute and prosecute a disciplinary proceeding against him, and the matter is referred to a Special Referee to hear and report.
 

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A Lot of Money is Missing...Is it Legal Malpractice?

"The defendants Alisa Schiff and Schiff & Skurnik, PLLC (hereinafter together the Schiff defendants), who served as the plaintiff's attorney with respect to the drafting, and the execution by the plaintiff, of a contract to sell her home (hereinafter the contract of sale), and the defendant Michael Gross, who served as the plaintiff's attorney for the related real estate closing, failed to meet this burden. Contrary to the Supreme Court's conclusion, the Schiff defendants and Gross failed to demonstrate, prima facie, that the plaintiff did not sustain any actual or ascertainable [*3]damages as a result of their alleged negligence. The contract of sale provided that the purchase price of the plaintiff's home was $615,000, with the plaintiff to credit the purchaser with the sum of $155,000 at the closing. Approximately $241,000 of the proceeds of the sale went to satisfy the plaintiff's mortgage, and the plaintiff received approximately $216,000. The Schiff defendants and Gross failed to eliminate triable issues of fact as to the propriety of the $155,000 credit to the purchaser and other disbursements made of the proceeds, and thus, as to whether the plaintiff should have obtained more money for the sale of her home than she received. " So, in Gelobter v Fox ;2011 NY Slip Op 09268; Appellate Division, Second Department we see that both sets of defendants failed to clear themselves of potential liability.
 

"The Schiff defendants failed to meet their prima facie burden on the issue of proximate cause, as they merely established, in this respect, that they did not participate in the real estate closing. However, this fact did not negate any negligence on their part in the drafting of the contract of sale, which the plaintiff signed under Schiff's representation, and in connection with alleged alterations made to the purchase price on the contract prior to the real estate closing. In other words, as the contract of sale had already been signed and altered before the real estate closing, contrary to the Schiff defendants' contention, they did not establish as a matter of law that Gross had "a sufficient opportunity to protect the plaintiffs' rights" (Katz v Herzfeld & Rubin, P.C., 48 AD3d 640, 641), such that Schiff's conduct could not have proximately caused the plaintiff's damages. "


 

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A Pox On Both Houses in a Case Permeated Wtih Fraud

Ponzi schemes probably make bad law, in as much as everyone points the finger at everyone, and claims of fraud swirl through and through.  So it goes in Kimmel v Schon  2013 NY Slip Op 32318(U) September 26, 2013  Sup Ct, Kings County  Docket Number: 015633/2012  Judge: Bernard J. Graham.

A real estate purchase, a loan , ponzi schemes, claims of legal malpractice?  What is more interesting is the appalling lack of formality in the summary judgment practice.  Plaintiff, who is an attorney, files his own affirmation, which is rejected by the court.  The motion for summary judgment lacks the admissible evidence of a person with actual knowledge, which is its own reason to deny the motion.

"The instant motion, by which plaintiff seeks dismissal of the counterclaims and summary judgment appointing a referee to compute, is supported solely by the plaintiffs attorney's affirmation. Also provided as exhibits in support of the instant motion are (1) an affirmation of Miriam W. Hermann (Hermann), and (2) an affirmation of Kimmel. In support of plaintiffs argument disputing the Schons' assertion that Tepfer & Tepfer did not represent him at the loan closing, Hermann states that, as an attorney associated with the law firm of Ferro Labella & Zucker LLC, she represented the lender in the subject transaction, drafted the papers and attended the closing at which the Schons were represented by Tepfer & Tepfer, P.C. In addition, she states that at the closing, the borrowers signed a closing statement, and were provided with an opinion letter by Tepfer & Tepfer. In further support, stating that he is an attorney duly admitted to practice in the State of New York, Kimmel provides, as plaintiff, his own attorney's affirmation. He states that as lender and administrator of the subject loan, he received all payments made thereunder, and he (1) never agreed to extinguish the note, (2) never agreed to accept a new note to replace the one that is at issue here, and (3) there was never a new obligation that replaced the Note, and no new contract was discussed or drafted with respect thereto. "

"Plaintiff s motion for summary judgment must be denied. It is well settled that on a motion for summary judgment, an affidavit of counsel who demonstrates no knowledge of the underlying facts is without probative value (see Zuckerman, 49 NY2d at 563, citing Columbia Ribbon & Carbon MIg. CO. v A-J-A Corp., 42 NY2d 496,500 [1977]; Israelson v Rubin, 20 AD2d 668 [1964], affd 14 NY2d 887 [1964]; Lamberta v Long Is. R. R., 51 AD2d 730 [1976]). Here, plaintiffs counsel's affirmation is silent regarding his basis of knowledge of the underlying facts. Moreover, the affirmation of plaintiff, an attorney, is not admissible in this instance. Under the language of CPLR 2106,2 the use of an unsworn affirmation bearing the individuals signature alone, in lieu of an affidavit, is prohibited where the signatory, even if otherwise authorized by the statute, is a party to the action (see Slavenburg, Corp. v Opus Apparel, Inc, 53 NY2d 799, 801[FN] [1981]; Schutzer v Suss- Kolyer, 57 AD2d 653 [1977]; Fitzgerald v Willes, 83 Misc 2d 853 [App Tenn 1975]). Consequently, plaintiff has failed to meet his initial burden of making a prima facie showing of entitlement to judgment as a matter of law, requiring denial of his motion and regardless of the sufficiency of the opposing papers (see Vega v Restani Const. Corp., 18 NY3d 499 [2012]). In any event, were it necessary to do so, the court would find that defendants have met their burden of raising an issue of fact in opposition to plaintiff s motion through their particularized showing, in admissible form, that the underlying transaction was permeated with, and arose out of, fraudulent conduct."

 

 

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Plaintiffs Lose Case and Must Pay Their Attorneys

So many of these cases start over a fee. Here, relatives try to push relatives out of a house (we guess it was bequeathed to both), and clients end up spending about $ 50,000 to avoid being put in the street. Then, it comes time to pay the attorneys. This leads to an attorney fee case and a legal malpractice counterclaim. In the end, clients lose all around.

Davis v Siskopoulos 2013 NY Slip Op 30353(U)   Supreme Court, New York County Docket Number: 111965/04 Judge: Barbara Jaffe.

"In 2000, defendants hired plaintiff law firm to defend them in a partition action commenced by the brother of decedent Angelo Siskopoulos seeking to evict them from their residence. A referee held a hearing and issued a report finding that defendants had not ousted the brother from the residence, and awarded defendants certain damages, including reimbursement of half of the mortgage payments paid by them and for repairs and maintenance of the property. (Affidavit of Bonnie Reid Berkow, Esq., dated Feb. 13,2012 [Berkow Affid.], E)(h. GG). Between August 1,2000 and December 21,2003, plaintiff rendered legal services to them. As of January 31,2004, defendants had paid plaintiff $8,559.68 for its services, leaving a balance of$45,577.92. (Affirmation of Alexandra Siskopoulos, Esq., dated Feb. 12,2012 [Siskopoulos Aff.], Exh. A).
On or about August 16, 2004, plaintiff commenced the instant action against defendants, asserting causes of action for an account stated and quantum meruit.

Defendants' failure to plead the specific allegations in their affirmative defenses is not fatal here as plaintiff opposes them on the merits and defendants asked questions relating to them in discovery. (See Drago v Spadafora, 94 AD3d 1041 [2d Dept 2012] [no showing made that plaintiffs were taken by surprise or prejudiced by defendant's use of unpleaded affirmative defense in support of his motion for summary judgment]; Sullivan v Am. Airlines, Inc., 80 AD3d 600 [2d Dept 2011] [unpleaded defense may serve as basis for granting summary judgment in absence of surprise or prejudice to opposing party]; Joan Hansen & Co., Inc. v Everlast World's Boxing Headquarters Corp., 2 AD3d 266 [1 st Dept 2003], Iv denied 2 NY3d 702 [2004] [summary judgment may be granted on unpleaded defense where opponent of motion has not been surprised and fully opposed motion]).

Here, defendants have failed to establish, prima facie, that plaintiff is not an expert in the real estate field or had no experience dealing with partition actions as plaintiff s discovery response that it could not recall working on partition actions before 2000 does not constitute an admission that it had no experience working on such actions, and they cite nothing in Wagner's deposition testimony that is relevant to this claim. Thus, to the extent that plaintiff made certain representations to defendants, defendants have not shown that they were false misrepresentations. In any event, as defendants fail to submit an affidavit from someone with personal knowledge of the circumstances underlying their retention of plaintiff, they cannot establish that plaintiff made the representations to them on which they relied, and the printout of plaintiffs website is not probative. (See eg Dombroski v Samaritan Hasp., 47 AD3d 80 [3d Dept 2007] [general accusation of deception not based on personal knowledge insufficient to establish estoppel]; Cohen v Houseconnect Realty Corp., 289 AD2d 277 [2d Dept 2001] [complaint contained no allegations setting forth alleged misrepresentations, and no such allegations were contained in plaintiffs affidavit submitted on motion]; Urquhart v Philbor Motors, Inc., 9 AD3d 458 [2d Dept 2004] [affidavit submitted by defendant insufficient to establish prima facie entitlement to summary judgment as it was not by person with first-hand knowledge of alleged misrepresentations]; see also Nissan Motor Acceptance Corp. v Scialpi, 83 AD3d 1020 [2d Dept 2011] [conclusory and unsubstantiated allegations of fraud and misrepresentation insufficient]; cf Silber v Muschel, 190 AD2d 727 [2d Dept 1993] [defendant submitted fact-specific affidavit evincing first-hand knowledge of misrepresentations made by plaintiff during parties' negotiations]; Slavin v Victor, 168 AD2d 399 [1 st Dept 1990] [in alleging fraud, party appropriately offered affidavit of person with first-hand knowledge as to nature of misrepresentations). For the same reasons, defendants have not established their claim that plaintiff breached ethical rules by holding itself out as an expert in real estate.


 

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Not now, thanks...Try that Legal Malpractice Case Again Later

What happens when plaintiff believes that defendant made a serious mistake, and some time has passed, but the underlying case has not yet concluded?  The statute of limitations and the requirement for "ascertainable damages" come in conflict.  Wait too long and the statute will have passed.  Start too early, and one sees a result similar to Flintlock Constr. Servs., LLC v Rubin, Fiorella & Friedman LLP ; 2013 NY Slip Op 06313  ; Decided on October 1, 2013 ; Appellate Division, First Department .  Case dismissed for now, but try again later.
 

"In this legal malpractice action, plaintiff alleges that defendant law firm negligently represented it in connection with underlying construction litigation by entering into a stipulation, without its authorization, pursuant to which it became obligated to defend and indemnify the owner of the subject premises in the underlying litigation without limitation. Defendant incorrectly argues that plaintiff's claims should be dismissed as a matter of law based on the Eleventh Circuit's vacatur of the federal district court's finding that the stipulation requires plaintiff to defend and indemnify the premises owner without limitation and for its own negligence (see Flintlock Constr. Servs. v Well-Come Holdings, LLC, 710 F3d 1221, 1224 [11th Cir 2013]). The Eleventh Circuit vacated the decision on diversity grounds and did not reach the merits of the subject stipulation.

Contrary to defendant's assertion, the documentary evidence does not conclusively refute plaintiff's allegations (see Franklin v Winard, 199 AD2d 220, 220 [1st Dept 1993]), since the premises owner, its consultants and subcontractors are named in the underlying litigation, their contracts are not included in the record on appeal, and the allegations against them include the types of activities which form the basis of the underlying complaints. Nevertheless, even if the stipulation provides for an unlimited obligation, there has been no finding that the project owner was negligent. At this juncture, plaintiff's allegations of proximate cause and damages are premature or speculative, as it is unable to prove that any such damages are directly traceable to defendant's conduct (see InKine Pharm. Co. v Coleman, 305 AD2d 151, [*2]153-154 [1st Dept 2003]). Accordingly, we dismiss without prejudice to raising the malpractice claims upon resolution of the underlying action. "

 

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They Promise to be Lead Counsel. They Arent't. Can you Sue?

Big corporate client goes to Big white shoe law firm and believes that the Big litigator there will take and handle the case. It does not happen. A lesser light handles the case, and the Big Corporate client is unhappy. Now what?

Matter of Matter of G.K. Las Vegas Ltd. Partnership v Boies Schiller & Flexner LLP 2012 NY Slip Op 04831 Decided on June 14, 2012 Appellate Division, First Department.
 

"In this proceeding alleging the law firm's breach of performance of a retainer agreement, including breach of an alleged oral agreement to have a particular attorney in its firm serve as lead counsel in an underlying matter, the client failed to preserve its arguments that the law firm did not meet its burden of demonstrating that the client fully understood the terms of the parties' retainer agreement, and that public policy rendered such retainer agreement unenforceable, as these arguments were not sufficiently brought to the attention of the arbitrator. (see Edward M. Stephens, M.D., F.A.A.P. v Prudential Ins. Co. of Am., 278 AD2d 16 [2000]; see also Matter of Joan Hansen & Co., Inc. v Everlast World's Boxing Headquarters Corp., 13 NY3d 168, 173-174 [2009]). The client did not explicitly argue that the law firm violated public policy by failing to ensure that the client fully understood the terms of the parties' retainer agreement. It only argued that parol evidence was needed because the retainer agreement, as written, was allegedly incomplete and/or ambiguous.

Were we to reach the merits of the client's public policy argument, we would find it unavailing. The parties agreed to arbitrate any disputes arising from their retainer agreement, and there is no basis to conclude that the asserted public policy ground (requiring a client's full knowledge and understanding of an attorney-client retainer agreement) was violated. The arbitrator's award dismissing the client's challenge to the legal fees that were due in accordance with the express terms of the parties' amended written retainer agreement had a rational basis, inasmuch as the Arbitrator found the written retainer arrangement to be unambiguous and to constitute a fully integrated agreement that would satisfy the requirements of 22 NYCRR 1215.1 (see generally Matter of Motor Veh. Acc. Indem. Corp. v Aetna Cas. & Sur. Co., 89 NY2d 214, 223-224 [1996]). The arbitrator's rejection of the sophisticated client's argument that sought inclusion of claimed oral terms that would modify the clear terms of the amended retainer agreement was rationally based in contract principles, including New York's parol evidence rule, [*2]and the criteria for allowing modification of written terms without altering them was not established by the client (see Mitchill v Lath, 247 NY 377 [1928]; Chemical Bank v Weiss, 82 AD2d 941 [1981], appeal dismissed 54 NY2d 831 [1981]). Since the terms of the fully integrated retainer agreement were unambiguous, there was no basis to consider parol evidence (see Slotnick, Shapiro & Crocker, LLP v Stiglianese, 92 AD3d 482 [2012]; Moore v Kopel, 237 AD2d 124, 125 [1997]).

Moreover, the client's argument that the arbitrator, in deciding the dismissal motion, denied it "fundamental fairness" by refusing to accept the truth of its allegations regarding the oral promise, including that the parties intended this oral promise to be a component of the parties' retainer agreement, thereby precluding it from offering evidence to demonstrate the parties' understanding in regard to the alleged oral promise, is unavailing. It was within the province of the arbitrator to find, as a matter of law, that the retainer agreement was not ambiguous (see W.W.W Assoc. v Giancontieri, 77 NY2d 157, 162 [1990]), notwithstanding the client's claims that alleged oral promises were intended to be added as components of the written retainer agreement. Since an arbitrator's award ordinarily will not be vacated even if founded upon errors of law and/or fact (see Wien & Malkin LLP v Helmsley-Spear, Inc., 6 NY3d 471, 479-480 [2006], cert dismissed 548 US 940 [2006]), there is no basis to vacate this award founded upon applicable contract principles (see Szabados v Pepsi Cola Bottling Co. of N.Y., 191 AD2d 367 (1998)"
 

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Is It Legal Malpractice Not to Tell The Client to Review Its Insurance?

Client is sued for trade dress infringement.  "Trade Dress" are those non-functional aspects of an otherwise patented item.  Even after the patent runs out, "trade dress", or the appearance of a thing, remains protected.

Client had insurance that may have covered the law suit in which it was a defendant.  InUtica Cutlery Co. v Hiscock & Barclay, LLP  2013 NY Slip Op 06171  Released on September 27, 2013 Appellate Division, Fourth Department  we see the 4th Department denying summary judgment to defendant on the argument that its malpractice may be "a" proximate cause of the damages, even if not "the" proximate cause of the Damages. 
 

"Defendant moved for summary judgment on the ground that plaintiff had a contractual duty and actual knowledge of the requirement to notify its insurers of the commencement of the underlying action, which superceded any alleged duty that defendant had to plaintiff. We conclude that defendant "failed to meet its burden of establishing as a matter of law that any alleged negligence on its part was not a proximate cause of plaintiff['s] damages" (New Kayak Pool Corp. v Kavinoky Cook LLP, 74 AD3d 1852, 1853). Notably, a plaintiff in a legal malpractice action must establish that the defendant law firm was a proximate cause of damages, but need not establish that it was the proximate cause (see Barnett v Schwartz, 47 AD3d 197, 204-205). Defendant also failed to establish that plaintiff's conduct was an intervening and superseding cause such that defendant's alleged negligence was not a proximate cause of any damages (cf. Alden v Brindisi, Murad, Brindisi, Pearlman, Julian & Pertz ["The People's Lawyer"], 91 AD3d 1311, 1311; see generally Arnav Indus., Inc. Retirement Trust v Brown, [*2]Raysman, Millstein, Felder & Steiner, 96 NY2d 300, 304-305).

Contrary to defendant's contention, the court properly denied its alternative request for partial summary judgment on the second and fourth affirmative defenses and dismissal of a particular claim for damages. Defendant correctly notes that the insurance policies required plaintiff to give timely notice of the underlying action and properly alleges the culpable conduct of plaintiff in failing to give notice in a timely manner to the insurance companies as an affirmative defense (see generally Arnav Indus., Inc. Retirement Trust, 96 NY2d at 305 n 2). On this record, however, defendant has not established that plaintiff was comparatively negligent as a matter of law. Plaintiff's president explained at his deposition and in his affidavit the reason why he failed to give timely notice to the insurance companies, i.e., he did not believe that the underlying claim was covered by insurance. Whether that belief was reasonable and negated any culpable conduct on plaintiff's part is for a jury to determine. We further conclude that defendant failed to establish as a matter of law that the insurance policies would not have covered certain damages paid by plaintiff in the underlying action. "

We wonder why Darby & Darby, P.C. v. VSI, Int;l, 95 NY2d 308 (2000) was not mentioned. The Court of Appeals wrote:  "A New York law firm retained to defend a corporate client in a Florida patent infringement litigation had no duty to advise the client about possible insurance coverage for the costs of the litigation. Defendants' claim is based on a then novel theory that patent insurance coverage was available under an "advertising liability" clause in general liability policies, and at the time of plaintiff's representation, neither New York nor Florida recognized the duty of an insurer to defend patent infringement claims under a general liability policy's advertising injury clause. "

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Pro-Se Plaintiff Strikes Out

Plaintiff sues law firm, which represented his former employer after he failed to get them to file a corrected opinion letter to facilitate removal of restrictive legends on his stock certificate. The mistake was in the opinion letter where the law firm mistakenly said it represented "Plaintiff" rather than the employer.

The Appellate Division affirms Judge Bransten writes and writes an opinion that lists every attempt the plaintiff made to hold the law firm responsible, denying each.  In Cusack v Greenberg Traurig, LLP   2013 NY Slip Op 06070 Decided on September 26, 2013.

"The complaint stems from plaintiff's failed efforts to have defendant, counsel for plaintiff's former employer, American Defense Systems, Inc. (ADSI), issue a corrected opinion letter to facilitate removal of restrictive legends on his stock certificate. Defendants had issued an opinion letter that misstated that it represented plaintiff, rather than ADSI. Defendant asserts that ADSI subsequently directed it not to issue a corrected letter because ADSI maintains, in a separate lawsuit, that plaintiff fraudulently procured his employment and the stock.

The court properly dismissed the claim of legal malpractice, as there was no attorney-client relationship (Waggoner v Caruso, 68 AD3d 1, 5 [1st Dept 2009], affd 14 NY3d 874 [2010]). Defendant represented ADSI, not its shareholders or employees and, thus, not plaintiff (Eurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d 553, 562 [2009]). Contrary to plaintiff's contentions, nothing in the parties' actions created an attorney-client relationship (see Polovy v Duncan, 269 AD2d 111, 112 [1st Dept 2000]). Defendant's request that plaintiff complete a second shareholder questionnaire to issue a corrected opinion letter does not suffice to create an attorney-client relationship. Defendant represented ADSI in ongoing adversarial litigation against plaintiff after his employment was terminated. Moreover, plaintiff essentially acknowledges the lack of an attorney-client relationship, as his complaint largely stems from the allegation that defendant misstated that it represented plaintiff in the opinion letter.

Nor is there near privity to support a claim of legal malpractice based on an allegedly negligent misrepresentation. As the motion court noted, the opinion letter was addressed to BNY Mellon, and as plaintiff alleged in the complaint, the parties contemplated only that BNY Mellon, not plaintiff, would
rely on the letter (Prudential Ins. Co. of Am. v Dewey, Ballantine, Bushby, Palmer & Wood, 80 NY2d 377, 384 [1992]).

The motion court correctly dismissed the breach of fiduciary duty claim, as there was no attorney-client relationship and no other factual allegations establishing such a duty (see [*2]Eurycleia Partners, 12 NY3d at 562).

Plaintiff cites no allegations in the complaint to refute the motion court's conclusion that there was no breach of contract claim. Plaintiff failed to allege that the "contract," defendant's alleged acceptance of plaintiff's offer to issue a letter to remove the restrictive covenant, was supported by consideration. Since a claim for breach of a duty of good faith cannot be plead absent an underlying contract (see Keefe v New York Law School, 71 AD3d 569, 570 [1st Dept 2010]), that claim was properly dismissed as well.

The motion court correctly dismissed the fraud claim and both negligence claims as duplicative of plaintiff's malpractice claim (see Dinhofer v Medical Liab. Mut. Ins. Co., 92 AD3d 480, 481 [1st Dept 2012], lv denied 19 NY3d 812 [2012]; Weksler v Kane Kessler, P.C., 63 AD3d 529, 531 [1st Dept 2009]).

Contrary to plaintiff's contention, in assessing the common-law securities fraud claim, the motion court acknowledged that plaintiff's alleged deceptive practices included not only issuance of a defective opinion letter but also the subsequent failure to correct it. To allege fraud, however, the complaint must allege, among other things, that plaintiff justifiably relied on an alleged misrepresentation or material omission (IDT Corp. v Morgan Stanley Dean Witter & Co, 12 NY3d 132, 140 [2009]). The only alleged misrepresentation here was the misstatement in the opinion letter that defendant represented plaintiff, and the motion court correctly concluded that plaintiff failed to allege that he relied on it to his detriment.
The court also properly dismissed plaintiff's securities fraud claim based on General Business Law § 349, as plaintiff's allegations do not encompass consumer-oriented conduct (see Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20, 24-25 [1995]). "

 

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Privity and Legal Malpractice in the Modern Commercial Setting

Plaintiff is a 50% shareholder in a lucrative franchise operation, and at the end of a contract term both he and the entire franchise is faced with a difficult franchisor, which wants to upset the arrangement.  An attorney is hired, and not only does the eventual franchisor-franchisee litigation end badly, but the individual plaintiff is advised to forego a consulting contract worth $800,000.  May the individual sue the law firm?

Bayit Care Corp. v Einbinder 2013 NY Slip Op 51557(U)  Decided on September 24, 2013  Supreme Court, New York County  Bransten, J. holds that for the moment, he may sue.  A motion to dismiss was denied as to him. 
 

"Plaintiff Bayit is a corporation that provided healthcare services. Plaintiff Schreier is the 50% co-owner of Bayit, as well as its president and on-site manager. Defendant E & D is a law firm practicing, among other things, franchise law. Defendant Einbinder is an attorney at E & D.

As part of its business, Bayit had previously entered into a franchise agreement whereby Bayit, as franchisee, managed a healthcare center and paid the cost of [*2]administrative personnel. (Defs.' Order to Show Cause, Exhibit F ¶ 6.) The franchisor employed and paid the healthcare personnel, and coordinated billing and collection from customers of the center. (Id., Exhibit F ¶ 6.)

The instant litigation stems from the alleged failure of E & D and Einbinder to take certain actions with respect to the renewal of the Plaintiffs' franchise. In 2009, a dispute arose as a result of the imposition of certain business decisions by the franchisor on Bayit. (Am. Compl. ¶ 21.) Defendants were retained by Bayit and, according to the Amended Complaint, Schreier, in connection with this dispute. (Id. ¶ 19.) From January 2010 to June 2011, a total of three retainer agreements were executed between Plaintiffs and Defendants. (Id. ¶ 19.)

Following settlement discussions between the franchisor and Plaintiffs, on the advice of Einbinder, Plaintiffs commenced a lawsuit against the franchisor, rather than either renewing the franchise or accepting one of the buyout or termination offers made by the franchisor. (Id. ¶¶ 40-48.) According to Plaintiffs, Defendants likewise failed to advise them of the requirements for renewal of the franchise. (Id. ¶¶ 47, 87-89.) Defendants also advised Schreier to reject an offer to enter into a consulting agreement with the franchisor, which would have provided Schreier with up to $800,000 in income over a five-year period. (Id. ¶¶ 9, 43.) Plaintiffs maintain that Defendants knew or should have known that Plaintiffs wanted to renew the franchise and that the franchise had monetary value to the Plaintiffs, and that Defendants took no action to renew the franchise until after the deadline for doing so had passed. (Id. ¶¶ 79-80.) "

""It is well settled that a corporation's attorney represents the corporate entity, not its shareholders or employees." Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 NY3d 553, 562 (2009) (citations omitted). As the First Department has observed, "[a] lawyer's representation of a business entity does not render the law firm counsel to an [*4]individual partner, officer, director or shareholder unless the law firm assumed an affirmative duty to represent that individual." Campbell v. McKeon, 75 AD3d 479, 480-81 (1st Dep't 2010). That is, "[u]nless the parties have expressly agreed otherwise in the circumstances of a particular matter, a lawyer for a corporation represents the corporation, not its employees." Talvy v. American Red Cross, 205 AD2d 143, 149 (1st Dep't 1994), aff'd, 87 NY2d 826 (1995).

In this case, the record is unclear as to whether there was such an express agreement given the manner in which the retainer agreements were drafted. Each of the retainer agreements was addressed to Schreier personally, care of his business address at Bayit. (Am. Compl. ¶ 24.) " [T]he addition of a care of line . . . merely adds a person at that address who may claim the mail.'" Matter of Informart New York LLC v. Hugh O'Kane Elec. Co. LLC, 2003 WL 26094732, at *1 (Sup. Ct. NY County Jan. 6, 2003) (quoting Hoffenberg v. Commissioner, 905 F.2d 665, 666 (2d Cir. 1990)). See Russell & Annis v. Livingston & Wells, 16 NY 515, 518 (1858) (explaining that "[o]rdinarily, the address of a package to the care of any one is an authority to the carrier to deliver it to such person").

Moreover, the retainer letters do not clearly identify Bayit as the client. (Am. Compl. ¶ 25.) To the contrary, the January 11, 2010 retainer letter begins, "Dear Mr. Schreier: This retainer letter is intended to express our mutual understanding regarding our legal representation of you." (Defs.' Order to Show Cause, Exhibit C, at 1.) Similarly, the June 13, 2011 retainer letter begins, "Dear Shabsi: This confirms that you have retained Einbinder & Dunn, LLP ( E & D') to represent you in the above-referenced action." (Id., Exhibit D, at 1.) Likewise, the June 28, 2011 retainer letter begins, "Dear Shabsi: This confirms that you have retained Einbinder & Dunn, LLP ( E & D') to represent you in the above-referenced actions in New York and Louisiana and in the Louisiana action to work with the local attorney." (Id., Exhibit E, at 1.)

Also significant is the fact that Defendants made multiple references to Schreier as their client during a hearing in a consolidated action against the franchisor, and as part of that action, Schreier submitted sworn declarations to that court "focus[ing] on his personal contributions to the Franchisor." (Am. Compl. ¶¶ 69-70.) In Cooke v. Laidlaw Adams & Peck, Inc., 126 AD2d 453 (1st Dep't 1987), the First Department held that "[a]n attorney's appearance in a judicial or quasi-judicial proceeding creates a presumption that the attorney-client relationship exists." Cooke, 126 AD2d at 455 (citation omitted). Finding that an attorney-client relationship between a corporation's employee and corporate counsel did, in fact, exist, that court noted that it was "significant" that corporate counsel appeared at a proceeding involving an employee of a corporation and "admitted on the record before the SEC that they were appearing personally on [the employee's] behalf." Cooke, 126 AD2d at 455.

Accordingly, both the language of the retainer agreements and Defendants' conduct are sufficiently ambiguous as to create an issue of fact regarding the identity of [*5]Defendants' client.

Defendants separately argue that Schreier is not a third-party beneficiary of the retainer agreements between Bayit and E & D, and that there are no "special circumstances" present that would give Schreier standing to bring this legal malpractice claim against E & D notwithstanding the absence of an attorney-client relationship.

"While privity of contract is generally necessary to state a cause of action for attorney malpractice, liability is extended to third parties, not in privity, for harm caused by professional negligence in the presence of fraud, collusion, malicious acts or other special circumstances." Good Old Days Tavern, Inc. v. Zwirn, 259 AD2d 300, 300 (1st Dep't 1999) (citations omitted). "[S]pecial circumstances" are present where the relationship between the plaintiff and the defendant attorney is "tantamount to one of contractual privity." Good Old Days Tavern, Inc., 259 AD2d at 300. The First Department found that special circumstances were present where the plaintiff "was the president and sole shareholder" of the corporation that had retained the defendant attorney and running that corporation was the business from which "he derived his livelihood." Good Old Days Tavern, Inc., 259 AD2d at 300.

Defendants distinguish the holding in Good Old Days from the instant case, citing Topor v. Enbar, 841 N.Y.S.2d 824 (Sup. Ct. NY County 2007). In Topor, the plaintiff alleged that he and multiple related entities had retained and consulted the defendant attorney, and the court found that the plaintiff "held, at most, a minority interest" in the corporate client. Topor, 841 N.Y.S.2d at 824 (emphasis added).

However, the facts in Topor are distinguishable from those in this case. Here, Plaintiffs allege that Schreier was a 50% co-owner of Bayit, that he was Bayit's president and on-site manager, and that he was a "foreseeable third-party beneficiary" of certain agreements between Bayit and the franchisor. (Am. Compl. ¶¶ 2, 18.) Plaintiffs also allege that "Defendants knew or should have known" that the "Franchisor was motivated to terminate Bayit's Franchise," "that Bayit wanted to renew its franchise for an Additional Term of five (5) years until March 31, 2017, and that this renewal term had substantial monetary value to Bayit and Mr. Schreier." (Id. ¶¶ 41, 79.) Moreover, Plaintiffs allege that Defendants "counsel[ed] Mr. Schreier to decline" the offer to provide consulting services to the franchisor, and that as a result of failing to renew the franchise, Schreier lost his annual income of $300,000 and $800,000 in consulting fees. (Id. ¶¶ 9, 14-16.) "

 

 

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Was It Legal Malpractice To Settle the Case Too Fast?

Plaintiff unlocks the front door to his apartment building and it knocked unconscious as soon as he enters the lobby.  Three men run out with bats in hand.  Is there a case against the landlord?  In Angeles v Aronsky  2013 NY Slip Op 05955  Decided on September 24, 2013  Appellate Division, First Department we see not only that there easily could be a case for premises security liability, but it could be legal malpractice to settle too fast, and potentially, for too little money.
 

"Shortly after the attack, plaintiff retained defendant to represent him in a potential personal injury case. According to defendant, an investigator from his office initially interviewed plaintiff at the hospital. Defendant asserts that he later spoke with plaintiff over the phone to review the information plaintiff had given the investigator. Plaintiff told defendant that the front door was locking properly on the day he received his injuries and mentioned no other entrances. Defendant accepted plaintiff's statements concerning the security of the building, and did not send an investigator to inspect the premises or visit the premises himself. Also, he did not interview the superintendent. [*2]

Although a settlement agreement was reached with the owner of the building prior to the commencement of any personal injury action, plaintiff commenced a legal malpractice action against defendant, alleging, inter alia, that he negligently investigated plaintiff's premises liability claim. Defendant moved for summary judgment dismissing plaintiff's complaint and the motion court denied the motion.

For a claim for legal malpractice to be successful, "a plaintiff must establish both that the defendant attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession which results in actual damages to a plaintiff and that the plaintiff would have succeeded on the merits of the underlying action but for' the attorney's negligence" (AmBase Corp. v Davis Polk & Wardwell, 8 NY3d 428, 434 [2007] [internal citation omitted]). A client is not barred from a legal malpractice action where there is a signed "settlement of the underlying action, if it is alleged that the settlement of the action was effectively compelled by the mistakes of counsel" (Garnett v Fox, Horan & Camerini, LLP, 82 AD3d 435 [1st Dept 2011] [internal quotation marks omitted], quoting Bernstein v Oppenheim & Co., 160 AD2d 428, 430 [1st Dept 1990]).
 

Plaintiff, a waiter with a sixth grade education, retained defendant to represent him in a premises liability claim, relying on defendant's expertise as a personal injury attorney to evaluate his claim and provide advice on the case. Plaintiff asserts that defendant only contacted him once after being retained, and only to ask him to go into defendant's office to sign paperwork for the case. Plaintiff, an unsophisticated client with no legal experience, states that defendant did not explain to him the strengths and weaknesses of his claim and did not do a proper investigation. Defendant does not dispute that he never went to the building or spoke to the superintendent, but argues that he fulfilled his obligation by conveying the settlement offer to plaintiff.

In this specific case, given plaintiff's lack of sophistication and his limited education, defendant's statement that he never conducted any investigation, except for speaking to plaintiff for a very limited time, raises a question of fact as to whether defendant adequately informed himself about the facts of the case before he conveyed the settlement offer. Furthermore, defendant says he told plaintiff, when he conveyed the settlement offer, that it was a "difficult liability case." It is difficult to understand, on the record before us, how he made that assessment without going to the building, or speaking to the superintendent. Because the evidence on a defendant's summary judgment motion must be viewed in the light most favorable to plaintiff (Branham v Loews Orpheum Cinemas, Inc., 8 NY3d 931 [2007]), we find there are questions of fact as to whether the attorney failed to exercise the ordinary reasonable skill appropriate under the circumstances.

The motion court properly found that plaintiff raised a question of fact as to whether the underlying action would have succeeded. To prevail on a premises liability claim, a plaintiff does not have "to exclude every other possible" explanation as to how the assailants entered the building, but only present "evidence [that] renders it more likely or more reasonable than not that the assailant was an intruder who gained access to the premises through a negligently maintained entrance" (Burgos v Aqueduct Realty Corp., 92 NY2d 544, 550-551 [1998]). In Bello v Campus Realty, LLC (99 AD3d 638, 639 [1st Dept 2012]), this Court found an issue of fact as to how the assailants entered the building where the plaintiff did not recognize her attackers as fellow tenants and the men were dressed as police officers. Similarly, in Chunn v New York City Hous. Auth. (83 AD3d 416, 417 [1st Dept 2011]), a factual issue was presented as to whether it was [*3]more likely than not that plaintiff's assailants were intruders where the men made no attempt to conceal their faces."

 

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Legal Malpractice Cases and Attorney Fee Collections

A recurring theme in defense-side publications in the legal malpractice field is the connection between attorney fee collection suits and subsequent legal malpractice counter-claims.  For us, its a chicken-egg issue.  Is the legal malpractice case a shameless effort to avoid payment, or did the non-payment arise because there was poor performance (read:  legal malpractice)?

We don't know, and we definitely don't link the two in this story.  We have no opinion on the quality of work performed by the Kasowitz law firm.  We do predict many further events in this large fee collection lawsuit reported today in the NYLJ by Christine Simmons

"Kasowitz Sues Ex-Client for $2.3 Million in Fees
Christine Simmons

New York Law Journal

2013-09-24 00:00:00.0

 

Kasowitz, Benson, Torres & Friedman is suing hedge fund manager Alphonse Fletcher Jr. for $2.3 million in unpaid legal fees after the firm represented him in a high-profile discrimination suit against the Dakota, the legendary co-op on the Upper West Side of Manhattan (See Complaint). Kasowitz Benson lawyers, including managing partner Marc Kasowitz, were counsel to Fletcher and Fletcher Asset Management.

Fletcher, a former president of the co-op board, alleged that the Dakota discriminated against him based on his race in its refusal to approve his application to purchase an apartment next to his own for the purpose of combining the two. Fletcher, in Fletcher v. Dakota, 101289-2011, in Manhattan Supreme Court, also alleged the Dakota defamed him by making false statements about his finances, including an observation that he had "checked out of his business" and was living on "borrowed money." The Dakota case is still pending.

In its Sept. 19 collection lawsuit, Kasowitz Benson v. Alphonse Fletcher, Fletcher Asset Management, 158590/2013, Kasowitz said it advised Fletcher from July 2011 through November 2012, and Fletcher did not object to the invoices. The firm said it has received partial payment of about $1 million, leaving an unpaid balance of about $2.3 million. The suit said Fletcher "ceased paying any of the fees and disbursements" under the retainer agreement "despite repeated demands for payment."

Nathaniel Read, a partner at Cohen & Gresser who represents Fletcher, did not return a message seeking comment. Neither Kasowitz nor a representative of the firm returned messages for comment."
 

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Death and Legal Malpractice

The decision is somewhat short on facts, but we guess that this case arose froma settled landlord-tenant case in which tenant then died. His estate sued his former attorneys, and the case continues. Frankel v Vernon & Ginsburg, LLP 2012 NY Slip Op 08425 Appellate Division, First Department tells us that the AD often scrutinizes the "but for" portion of the case very closely.

"The IAS court properly declined to dismiss the legal malpractice cause of action. Defendants failed to sustain their burden on summary judgment of demonstrating that plaintiff would be unable to prove one of the essential elements of his claim (see Sabalza v Salgado, 85 AD3d 436 [1st Dept 2011]). On the contrary, the record demonstrated that plaintiff's decedent had viable causes of action for breach of the warranty of habitability and nuisance against defendants in the underlying action (see 61 W. 62 Owners Corp. v CGM EMP LLC, 77 AD3d 330 [1st Dept 2010], affd in part, mod in part 16 NY3d 822 [2011]; Misra v Yedid, 37 AD3d 284, 285 [1st Dept 2007]). Furthermore, the record demonstrated that plaintiff's decedent might have recovered legal fees, which alone exceeded the amount of the settlement in this matter (Real Property Law § 234). "

 

 

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The French Person Defense

In an otherwise garden or varietal attorney fee dispute with a legal malpractice defense, we ran across the "French Person" defense to attorney fees for the first time. Justice Gische, in Singer v Adler ; 2010 NY Slip Op 33439(U); Sup Ct, NY County gave it short shrift.

"This action is based upon claims for legal services rendered by plaintiff, Stephen Sayre Singer, to defendant, Joel A. Adler. Adler brings a pre-answer motion to dismiss the verified complaint against him on the basis that it is barred by the statute of limitations and alternatively, he is a “French person” and a New York Court does not have personal jurisdiction over him, pursuant to Article 14 of the Civil Code of the Republic of France. Both parties are attorneys at law and each is self represented in this action."

"Defendant generally claims there is no personal jurisdiction over him because he is a “French person.” Whether this argument pertains to long arm jurisdiction or service of process, it fails.
CPLR 5 302 provides that a court may assert jurisdiction over a non-domiciliary when the non-domiciliary “transacts any business within the state” and the cause of action arises out of that business. See CPLR 302 (a)(l). In order to have personal jurisdiction over a defendant, it is essential that the suit against the non-domiciliary have some “articulable nexus” to the business transacted. See McGowan v, Smith, 52 NY2d 268, 272 (1981). The basis of plaintiffs complaint, premised on plaintiffs performance of legal services for defendant, and the non-payment of legal fees, while defendant was domiciled in New York, amounts to “transaction of business within the state” and has an “articulable nexus” to the business transacted, specifically the provision of legal
services. Therefore, personal jurisdiction over defendant is proper. "

 

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Fabrication of Documents in a Legal Malpractice Setting

The undisputed facts in this case are shocking. "The following facts are undisputed. In or about May 2004, plaintiff, which had a lease on the building located at 2944 3d Avenue in the Bronx , retained the law firm of Gold, Rosenblatt & Goldstein to commence a commercial summary nonpayment action against the subtenants of the building, Diab and Hasan Saleh, who were doing business as 2944 3d Ave Retail Corp.("Retail Corp."). Defendant Steven E. Goldstein, a then-partner of the firm undertook the representation of plaintiff, and after commencing the action (Steven's Distributions, Inc. v 2944 3rd Ave Realty Corp., Index No. 90110 (Civ Ct, B r o n x Co, 2 0 0 8 ) , fabricated several court orders purporting to award plaintiff various sums in back rent, so as to persuade plaintiff that Goldstein was actively prosecuting the action. "

So goes Steven's Distribs. Inc. v Gold, Rosenblatt & Goldstein 2012 NY Slip Op 31990(U)
July 24, 2012 Supreme Court, New York County Docket Number: 106283/09 Judge: Joan A. Madden. This case is another example of the microscopic examination of "proximate cause" that goes on in legal malpractice litigation.

Justice Madden goes on to find that no matter how much fooling around took place during the litigation it was doomed from the start because no demand for rent had been timely made. If no demand for rent, then no case. If no case, then the internal bad behavior of of no interest.

"Accordingly, while Goldstein's erroneous naming of the parties in the caption was unquestionably malpractice sufficient to have caused the dismissal of plaintiff's petition, and while, perhaps, Goldstein's (or Lubellls) failure to prepare plaintiff's bookkeeper for her testimony would also have been sufficient to cause the dismissal, plaintiff in any event could not have prevailed in the first proceeding, since it had failed to prove a pre-litigation rent demand. For that reason, Goldstein's (and possibly, Lubellls) negligence ''was not a proximate cause of any damages arising from the ?loss of the underlying action. Barnett v. Schwartz, 47 AD3d 197, 204 (2nd Dept 2007). Nor can plaintiff prove that, but for Goldstein's failure to prosecute the underlying case for almost t w o years, Retail Corp.'s motion to vacate its default would not have been granted by Judge Rodriguez. While Judge Rodriguez based her decision on l1 [the long standing status of [the] proceeding with no indication that respondent neglected to appear or negotiate, and no indication that petitioner zealously prosecuted its claim" (Chera Aff., Exh. 10, at 2 ) , Diab Salehls' affidavit in support of
Retail Corp's order to show cause noted both that there was no such entity as the petitioner named in the caption of the proceeding, and that petitioner lacked standing to prosecute i t s claim, since its lease with the over-landlord had been terminated for nonpayment."
 

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The Interconnection of Legal Malpractice and Personal Injury Cases

Personal injury and legal malpractice cases have many strong bonds. Because a sizable portion of the litigation world is devoted to personal injuries (on both the plaintiff's and defendant's side), one correctly expects significant legal malpractice litigation after-wards. How the legal malpractice case proceeds along with or after the PI case is a not well understood procedure. In Simoni v Costigan 2012 NY Slip Op 07882 Appellate Division, First Department and Simoni v Napoli 2012 NY Slip Op 08639;  Appellate Division, First Department we see two sides of the same issue.
 

 

 

Costigan: Although the personal injury actions and the legal malpractice action involve "a common question of law or fact" (CPLR 602[a]), consolidation could engender jury confusion and [*2]prejudice the defendants in the malpractice action (see Addison v New York Presbyt. Hosp./Columbia Univ. Med. Ctr., 52 AD3d 269, [1st Dept 2008]; Brown v Brooklyn Union Gas Co., 137 AD2d 479 [2nd Dept 1988]).

 

Napoli: The motion court providently exercised its discretion in denying defendants' request for a stay of the legal malpractice action pending resolution of plaintiff's personal injury action (see CPLR 2201). The proceedings do not share complete identity of parties, claims and relief sought (see 952 Assoc., LLC v Palmer, 52 AD3d 236 [1st Dept 2008]; Esposit v Anderson Kill Olick & Oshinsky, P.C., 237 AD2d 246 [2d Dept 1997]).

The motion court also properly permitted plaintiff to amend the complaint (see CPLR 3025[b]). The amended complaint and the documents submitted in support of the cross motion allege facts from which it could reasonably be inferred that defendants' negligence caused plaintiff's loss (see Garnett v Fox, Horan & Camerini, LLP, 82 AD3d 435 [1st Dept 2011]). At this stage of the proceedings, plaintiff does not have to show that he actually sustained damages as a result of defendants' alleged malpractice (id. at 436).


 

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Hoisted on One's Own Petard in Legal Malpractice

Falling into a trap laid by oneself is a pitiful outcome to litigation.  Plaintiff hires defendant attorney to represent plaintiff when he is sued. The underlying case seems to be a construction accident matter. Did plaintiff lose the case because defendant failed to make certain arguments, or was defendant prevented from making those arguments by his client? We can't really tell from the decision, but it seems that defendant undercut his own case here.'

Affordable Community, Inc. v Simon  2012 NY Slip Op 03789  Decided on May 15, 2012  Appellate Division, Second Department tells us: "The defendant here is an attorney who represented the plaintiff in a lawsuit asserted against the plaintiff by an individual who was injured at a construction site owned by the plaintiff. In this legal malpractice action, the defendant alleged that the plaintiff limited him to presenting only certain unsuccessful defense arguments in the course of representation. However, the defendant's own evidence raised a triable issue of fact regarding this allegation. Consequently, there remain triable issues of fact as to whether the defendant negligently failed to present viable defenses in the underlying action and if so, whether, as a result of such failure, the plaintiff incurred liability for damages in that lawsuit. Accordingly, the defendant's submissions in support of his motion for [*2]summary judgment did not establish, prima facie, that the plaintiff will be unable to prove the elements of legal malpractice and, thus, he failed to demonstrate his entitlement to judgment as a matter of law (see Mueller v Fruchter, 71 AD3d 650, 651; Rosenstrauss v Jacobs & Jacobs, 56 AD3d 453, 454). In light of our determination, we need not address the sufficiency of the plaintiff's opposition papers (see Scott v Gresio, 90 AD3d 736, 737; see generally Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853). "
 

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What is an Account Stated?

The Third Department gives a nice analysis of the law of "account stated" in its decision, Antokol & Coffin v Myers ;2011 NY Slip Op 06051 ;Appellate Division, Third Department .
 

""'An account stated is an agreement between parties to an account based upon prior transactions between them with respect to the correctness of the account items and balance due'" (J.B.H., Inc. v Godinez, 34 AD3d 873, 874 [2006], quoting Jim-Mar Corp. v Aquatic Constr., 195 AD2d 868, 869 [1993], lv denied 82 NY2d 660 [1993]). An attorney can recover fees on an account stated "with proof that a bill . . . was issued to a client and held by the client without objection for an unreasonable period of time" (O'Connell & Aronowitz v Gullo, 229 AD2d 637, 638 [1996], lv denied 89 NY2d 803 [1996]).

At trial, plaintiff introduced evidence of a retainer agreement between Antokol and defendant as well as unpaid invoices for legal fees dated between September 1995 and December 1996. Antokol testified that these invoices were ordinarily sent to defendant on a monthly basis and that defendant did not object to the bills until plaintiff commenced this action. Defendant testified that she did not remember receiving monthly bills but, in her prior deposition testimony, acknowledged that she thought she had received a bill most months. Although defendant claimed to have had "constant conversations about the bills" with Antokol, and Antokol admitted that he made efforts to get her to pay, including offering a 10% discount in February 1996, he testified that defendant never offered a reason for her refusal to pay the bills. Indeed, with the exception of one specific objection to work completed by one of Antokol's colleagues, which defendant ultimately agreed to pay, defendant did not claim to have made objections to any specific bill, despite the language at the end of each bill stating, "The above information will be deemed correct unless objection is made within 30 days." Further, defendant admittedly made no written objections to the bills. Under these circumstances, we agree with Supreme Court that defendant's general claims of verbal refusals to pay did not constitute a specific objection sufficient to defeat plaintiff's cause of action for an account stated (see Darby & Darby v VSI Intl., 95 NY2d 308, 315 [2000]; J.B.H., Inc. v Godinez, 34 AD3d at 875-876; PPG Indus. v A.G.P. Sys., 235 AD2d 979, 980 [1997]; see also Zanani v Schvimmer, 50 AD3d 445, 446 [2008]). "

"Turning to the adequacy of the services billed for, we agree with Supreme Court that the record demonstrates that plaintiff provided competent representation in a difficult matrimonial matter. Antokol's failure to establish grounds for divorce in defendant's favor, albeit clearly a point of frustration for defendant, was irrelevant, as fault did not affect the equitable distribution of marital assets (see Howard S. v Lillian S., 14 NY3d 431, 435-436 [2010]). Defendant's assertions that Antokol should have presented expert testimony to increase her share of the marital estate and that he was not prepared for trial are counterbalanced by record evidence that Antokol's decisions were part of his trial strategy and his claims that defendant's refusal to follow his advice at times interfered with his ability to achieve better results for her. In sum, the record evidence fully supports Supreme Court's finding that the alleged inadequacies of Antokol's representation are insufficient to undermine plaintiff's right to be paid for its services (see Matter of Wapner, Koplovitz & Futerfas v Solomon, 7 AD3d at 916). "

 

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Death, Estates and Legal Malpractice

Overturning a jury verdict is difficult.  Doing so in a legal malpractice case is hard.  Doing so, when the facts seem to be against you is even harder.  Cinao v Reers 2013 NY Slip Op 05791
Decided on September 11, 2013 Appellate Division, Second Department  shows that legal malpractice plaintiffs have to be almost wholly blameless if they wish to succeed.
 

"Here, the evidence supports the jury's finding that the defendant did not "depart[ ] from the exercise of that degree of care, skill, and diligence commonly possessed and exercised by a member of the legal community" (Edwards v Haas, Greenstein, Samson, Cohen & Gerstein, P.C., [*2]17 AD3d 517, 519). The jury properly credited evidence which established, among other things, that the defendant marshaled the trust assets, communicated with the attorneys representing the plaintiff's brother in an attempt to settle the brothers' dispute over the trust, advised the plaintiff to retain local counsel in Hawaii, and successfully sought to adjourn the proceedings several times to give the plaintiff sufficient opportunity to retain local counsel. The plaintiff admitted that he made no attempt to retain local counsel to oppose his brother's petition to remove him as sole trustee. In addition, it is undisputed that when the plaintiff retained the defendant in April 2000, the plaintiff had already breached the terms of the trust which required him to distribute $158,000 to his brother within six months of their mother's death, and that prior to retaining the defendant, the plaintiff, as the sole trustee, had not taken any steps to administer the trust. Thus, the jury properly concluded that the plaintiff's inaction as sole trustee led to the untimely distributions, as well as his removal as sole trustee, and that the defendant did not depart from the exercise of that degree of care, skill, and diligence commonly possessed and exercised by a member of the legal community in attempting to resolve the brothers' dispute and administer the trust. Accordingly, contrary to the plaintiff's contention, the verdict was supported by a fair interpretation of the evidence (see Lolik v Big V Supermarkets, 86 NY2d at 746). "

 

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A $7,171.00 Legal Malpracttice Case

We've seen $7 Million legal malpractice cases, and $ 700,000 cases, but it is rare to see a Supreme Court case for $ 7,171.00  Nevertheless, plaintiff brought Dash v Davis & Gilbert LLP
2013 NY Slip Op 51469(U)   Decided on September 6, 2013   Supreme Court, New York County
Ling-Cohan,  only to lose on a CPLR 3211 motion. 

"Defendants argue that plaintiff is seeking to re-litigate issues that were settled in the Surrogate's Court Action, and, thus, plaintiff's claims are barred by res judicata. Defendants further argue that, pursuant to CPLR 3211(a)(1), the undisputed documentary evidence disposes of plaintiff's claims. Defendants also contend that plaintiff's complaint must be dismissed as it fails to state a cause of action.
In opposition to defendants' motion, plaintiff argues that she was not previously provided with a full and fair opportunity to litigate her claims of fraud, negligence, and legal malpractice [*3]in the Surrogate's Court Action. Plaintiff also argues that the Executors failed to support the claim of pre-arrangement contracts with conclusive facts. Plaintiff alleges that on April 6, 2012, she received an email from defendants which contained a Final Accounting and a Stipulation of Settlement which differed from what was agreed upon. According to plaintiff, this proves defendants' deceit and fraudulent behavior. Specifically, in her opposition, plaintiff seeks damages of $7,171 for the difference between the agreed upon sale price of the Amsterdam Memorial Chapel and the actual sale price. In support, plaintiff proffers a letter sent by defendant Law Firm, dated November 10, 2011, to plaintiff's attorney in the Surrogate's Court Action with a proposed settlement of, inter alia, a "distribution of the estate's interest in the [Amsterdam Memorial] chapel in kind, or a sale for $60,000, whichever [plaintiff] prefer[s]. ...[I]f there is a distribution in kind, [defendant Harris] intends to sell her interest to Mr. Bethea in a separate transaction." Dash Affidavit in Opposition, Exh. K, p. 1. Plaintiff also proffers a copy of the email and Final Accounting, dated April 6, 2012, which lists the sale of the interest in the Amsterdam Memorial Chapel at $52,829, rather than $60,000. See Dash Affidavit in Opposition, Exh. L, Schedule A.

It is well settled that New York has adopted the transactional analysis approach to res judicata. "Under the transactional analysis approach..., once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or if seeking a different remedy". Cornwall Warehousing, Inc. v Town of New Windsor, 238 AD2d 370, 371 (2d Dep't 1997) (internal quotations omitted).

Here, plaintiff concedes that she raised objections in the Surrogate's Court Action, obtained an attorney to represent her, negotiated and ultimately agreed to a settlement in the Surrogate's Court Action, and withdrew her objections with prejudice. While plaintiff proffers a proposed settlement allegedly offered by defendants to settle the Surrogate's Court Action, such proposal did not result in the final settlement agreement. Significantly, plaintiff does not allege that she agreed to settle on the terms proposed in defendants' letter of November 10, 2011, and, thus, such proposed settlement is not conclusive proof of agreed upon terms. Further, the Final Accounting proffered by plaintiff dated April 6, 2012 - nearly five months after the proposed settlement - was admittedly received and reviewed by plaintiff, prior to her entering into the Stipulation of Settlement in the Surrogate's Court Action on April 19, 2012. Plaintiff, knowing that the interest in the Amsterdam Memorial Chapel was sold for $52,829, nonetheless, chose to settle the Surrogate's Court Action and withdrew her objections with prejudice; thus, she may not now contest her decision to settle the Surrogate's Court Action. "

 

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Does a Disciplinary Complaint End Continuous Representation?

When a claim for legal malpractice accrues is a contentious source of motion practice in legal malpractice litigation.  Traditionally it is said that malpractice accrues on the date of the mistake, but that it can be tolled because of continuous representation.  Continuous representation is said to require an understanding between client and attorney that more work needs to be done, and that there is a relationship of trust and confidence between them.  Disciplinary complaints tend to undermine the "trust and confidence" aspect of the equation.

in Miller v Friedman  2013 NY Slip Op 32030(U)  August 23, 2013  Sup Ct, New York County  Docket Number: 400833/12  Judge: Joan A. Madden finds that the attorneys continued to represent the client for a while, and that this particular disciplinary complaint did not end the continuous representation.

"An action for legal malpractice must be commenced within three years of accrual, regardless of whether the underlying theory is grounded in tort or contract law. See McCoy v. Feinman, 99 NY2d 295,301 (2002); CPLR 214(6). Accrual is measured from the date when the injury occurs. See Ackerman v. Price ‘Waterhouse, 84 NY2d 535 (1994). However, aider the continuous representation doctrine, when an attorney continues to represent a client in the matter from which the claim arises, the statute of limitations on the legal malpractice claim is tolled and the limitations period does not begin to run until the termination of the attorney-client relationship. Shumsky v. Eisenstein, 96 NY2d 164 (2001); Riley v. Segan, Nemerov & Singer, P.C., 82 AD3d 572 (lst Dept 2011). For the doctrine to apply, “there must be clear indicia of an ongoing, continuous, developing and dependant relationship between the client and the attorney.” Elizabeth Arden, Inc v. Abelman, Frayne & Schwab, 29 Misc3d 1215(A) (Sup Ct, NY Co 2010) (citing Luk Lamellen U. Kupplungbau GmbH v. Lerner, 166 AD2d 505,507 [2d Dept 1990); accord Henry v. Leeds & Morelli, 4 AD3d 229 (lst Dept 2004) (“relationship and bond of continuous trust necessary for the continuing representation doctrine to apply”).

Furthermore, contrary to defendants’ position, under these circumstances, plaintiffs complaint to the Disciplinary Committee filed in 20 10, does not establish as a matter of law that it no longer
represented plaintiff in April 20 1 1. Accordingly, the motion to dismiss on statute of limitations
grounds is denied."
However, defendants’ motion is granted to the extent of striking plaintiffs request for

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Everyone Is Sued; Attorneys Dismissed in a Realty Case

Except for the fact that they were there, there is little in this decision to show why the attorneys were sued.  Antonelli v Guastamacchia  2013 NY Slip Op 32046(U)  August 22, 2013  Supreme Court, Richmond County Docket Number: 100705/08  Judge: Joseph J. Maltese tells the story of a good real estate and mortgage company gone bad, and how the attorneys were not involved.

"The plaintiff, Nicholas Antonelli, is a businessperson versed in real estate transactions and money lending. Antonelli operates several real estate businesses, including several mortgage brokerage firms. On or about December 27, 2004, Antonelli advanced the sum of $600,000 for
the purposes of purchasing property to construct, and eventually sell eight homes on Sprague
Avenue and Amboy Road, on Staten Island, New York to the Decker Defendants’ escrow account to pay for expenses of the project, for which the 7296-7304 Realty Corp (“Realty Corp.”) was established. Steven Decker, Decker, Decker, Dito & Internicola, LLP and their predecessor firm represented Antonelli, his wife Susan Guiffre, and his various companies in connection with making mortgage loans for 20 years. Guastamacchia and Lentini constructed the eight homes. The first six homes were sold without incident. According to the deposition testimony elicited in this action, Guastamacchia would keep Antonelli apprised of the status of the closings as they took place. During the first six closings the Decker defendants represented Realty Corp. in the transactions, with Guastamacchia appearing on behalf of the Realty Corp. "

"The last two units to be sold were located at 7300 Amboy Road and 7302 Amboy Road on Staten Island. On August 28, 2007, the defendant Catherine Guastamacchia applied for a loan from the defendant HCI to “refinance” and “cash out” the properties located at 7300 Amboy Road and 7302 Amboy Road. On September 13, 2007 and September 14, 2007 the Realty Corp transferred these to properties to Catherine and Vito Lentini and the properties were subsequently refinanced. These actions were taken without Antonelli’s knowledge or consent. Indeed, there is no evidence that the Decker defendants were in anyway involved with the transfers and subsequent mortgages on the last 2 houses that Guastamacchia and Lentini transferred from the Realty Corp. unto themselves without Decker’s knowledge or consent. This was a conversion by Guastamacchia and Lentini.
On or about February 10, 2006, Antonelli’s corporation, Cucamonga, LLC made a loan in the amount of $499,000 to V.E.V. Development LLC. In return Cucamonga, LLC received a mortgage on property located at 157 Kiswick Avenue, Staten Island, New York. The plaintiffs’ allege that the Decker defendants failed to file a mortgage lien on this property. In deposition testimony in connection with this action, Antonelli testified that this loan was repaid in its entirety and consequently, there are no damages sustained by Antonelli. But more importantly, Cucamonga, LLC is not a party to this action."

'Here, the Decker Defendants demonstrated that they did not commit any acts of negligence. It is acknowledged by the plaintiffs that the Decker Defendants were not in any way involved in the transfer of 7300 Amboy Road and 7302 Amboy Road from the Realty Corp. to the Lentinis. Moreover, with respect to the Kiswick Avenue property, it is conceded that the plaintiff Antonelli’s loan was repaid in fully. Consequently, there is no evidence that Antonelli sustained any damage
irrespective of whether the Decker Defendants failed to file a mortgage lien on the Kiswick  Avenue property. Consequently, the plaintiffs’ failed to raise an issue of fact in opposition to the defendants’ motion for summary judgment, nor have they met their burden going forward on
their own motion for summary judgment. Therefore, summary judgment is granted in favor of
the Decker Defendants."

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Malpractice? Possibly. Breach of Contract? No

Kassel v Donohue  2013 NY Slip Op 32015(U)  August 22, 2013  Supreme Court, New York County  Docket Number: 150886/2013  Judge: Eileen A. Rakower is an example of the court working its way through a series of causes of action, and individually (rather than blanketly) upholding or dismissing them.

"As alleged in the proposed Amended Complaint, in or about July 2010, Plaintiff retained the legal services of defendant C&D, a New York law firm of which defendant Donohue was a member, in connection with an arbitration pending against Plaintiffs former employer ISSI Holdings, LLC. The arbitration arose from ISSI's alleged default on a prior judgment in Plaintiffs favor in the amount of$I,822,500. It is alleged that at Donohue's bequest, Plaintiff executed an engagement letter with
the accounting firm of CC&C and Lynch to provide forensic accounting services and expert testimony in connection with the arbitration. Donohue, along with Plaintiff and Lynch, also executed that engagement letter. As further alleged in the proposed Amended Complaint, Plaintiff became
dissatisfied with CC&C and Lynch's services in the weeks preceding the arbitration, and instructed Donahue to discharge them. It is further alleged that Donahue ignored Plaintiffs instruction, Donohue and Lynch concealed from Plaintiff the full extent of their involvement in the preparation for arbitration, and Donohue directed Lynch to opine contrary to Plaintiff s position that the appropriate interest rate applicable to the Default Judgment was 9%, rather than a two percent rate of interest. The proposed Amended Complaint asserts the following causes of action: legal
malpractice as against defendants Donohue and C&D (first cause of action), breach of contract against defendants CC & Lynch (second cause of action), and seeks to set aside the engagement letter of defendants CC & Lynch (third cause of action)

"To sustain a cause of action for legal malpractice, moreover, a party must show that an attorney failed to exercise the reasonable skill and knowledge commonly possessed by a member of the legal profession." (Darby & Darby v. VIS Int 'I, 95 N.Y. 3d 308, 313 [2000]). In order to prevail against an attorney on a legal malpractice claim, a plaintiff must first prove that the attorney was negligent, that such negligence was the proximate cause of the loss sustained, and that actual damages resulted. (see Tydings v. Greenfield, Stein & Senior, 2007 NY Slip Op 6734, *2 [1 st Dept. 2007]). Here, the four corners the Amended Complaint make out a claim for legal malpractice against defendants Donohue and C&D. The Complaint alleges that defendants Donohue and C&D were negligent in "advocat[ing] for the improper interest rate at the 2011 Arbitration," "advocating for no acceleration on the default," and by failing to correct his alleged legal and factually incorrect assertions concerning the default rate when provided an opportunity", and that but for this
negligence, the arbitrators would have awarded 9% statutory interest and accelerate the payment of the amount in default. The second cause of action of the proposed Amended Complaint alleges breach of contract against defendants CC and Lynch. It alleges that Plaintiff and CC and Lynch entered into a contract with Plaintiff, that pursuant to its terms, CC and Lynch were to provide Plaintiff with biweekly billing for services rendered under the Retainer Agreement, and that they failed to do so thereby depriving Plaintiff of notice of the extent of the services being rendered. It further alleges that CC & Lynch were required to request and receive payment prior to the drafting of an expert report and that they failed to submit the required advance notices for these services. However, despite this alleged breach of the terms of the contract, the Complaint then asserts that
"Plaintiff sustained economic damages as a direct and proximate result of the professional malpractice of Defendants CC and Lynch," and that "but for" this professional negligence, Plaintiff would not have sustained economic damages. This cause of action therefore fails to state a claim because although it asserts the existence of a contract and breach of that contract, it does not allege damages as a result of that breach but rather as a result of Defendants' "professional negligence," a claim that Plaintiff has withdrawn."

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Legal Malpractice Case by a Judge Results in Sanctions

Board of Mgrs. of Foundry at Wash. Park Condominium v Foundry Dev. Co., Inc.   2013 NY Slip Op 51423(U)   Decided on August 23, 2013   Supreme Court, Orange County   Marx, J. is a short caption for a very convoluted case.  It involves real estate as does much NY litigation.  What is particularly interesting here is that the attorney defendants (admittedly the tail of the dog) seem to have been vindicated earlier, yet are dragged in again.  More to the point, the Court strongly admonishes plaintiff, who is "a judge in a lower court" and hits him with the full $ 10,000 sanction along with attorney fees.
 

"It is obvious that Plaintiffs are attempting to use this derivative action to launch a collateral attack on counsel for The Foundry in an effort to hobble their legal representation of The Foundry in Action No. 1. The Foundry's claims against Plaintiffs in Action No. 1 have survived pleading motions but their ultimate merit remains to be determined. Plaintiffs must await the trial and/or resolution of Action No. 1 and advance their defenses appropriately in that action instead of raising them here under the guise of an action that purports to vindicate the rights of the very entity that is prosecuting claims against them. Essentially, Plaintiffs' claim is that but for the negligence of counsel, the action brought against them on The Foundry's behalf would not have been filed. While they may incorporate that notion into their defense against The Foundry's claims, it cannot serve as the basis for a derivative action on behalf of The Foundry against their own counsel, particularly while The Foundry's case is ongoing. This Court declines to be made a party to such efforts. As the Court previously noted in its Decision and Order dismissing Plaintiffs' claims against Smith, Buss & Jacobs, the liens are intended to protect the interest of The Foundry and its ability to recover on its claims in Action No.1. Plaintiffs may not thwart that effort with this collateral attack on counsel's representation of The Foundry. Accordingly, BSRB's motion to dismiss is granted.

Sanctions

BSRB requests sanctions against Plaintiffs pursuant to 22 NYCRR §130-1.1(c) for filing a frivolous claim.

Pursuant to 22 NYCRR §130-1.1(c) "conduct is frivolous if:

(1) it is completely without merit in law and cannot be supported by a reasonable argument for an extension, modification or reversal of existing law;
(2) it is undertaken primarily to delay or prolong the resolution of the litigation, or to harass or maliciously injure another; or
(3) it asserts material factual statements that are false."
The Court finds Plaintiffs' conduct in asserting the claim for breach of fiduciary duty against BSRB to be frivolous within the meaning of 22 NYCRR §130-1.1(c), because it is "completely without merit in law" and was "undertaken primarily to delay or prolong the resolution of the litigation, or to harass or maliciously injure another; or
(3) it asserts material factual statements that are false."
The Court finds Plaintiffs' conduct in asserting the claim for breach of fiduciary duty against BSRB to be frivolous within the meaning of 22 NYCRR §130-1.1(c), because it is "completely without merit in law" and was "undertaken primarily to delay or prolong the resolution of the litigation, or to harass or maliciously injure another." It is apparent, as this Court has already stated, that Plaintiffs undertook a claim against BSRB in an effort to thwart their efforts to adequately represent The Foundry. In fact, Plaintiffs' suit against BSRB is part of a disturbing pattern that has emerged in these cases, whereby the defendants in Action No. 1, including Plaintiffs herein, seek to attack the attorneys representing The Foundry rather than address the merits of the claims that are alleged against them. The Court is deeply dismayed at [*5]the dilatory and disingenuous conduct that has been displayed, including the filing of related actions in other courts, the existence of which was not disclosed to this Court until the filing of a motion to consolidate and/or join such actions with Action No. 1, which has been pending in this Court. The pattern of delay and distraction which has emerged is a drain upon the resources of this Court and counsel who have had to respond to the unrelenting efforts to protract the litigation and prevent the adjudication of Action No. 1 on the merits. Such conduct cannot and will not be tolerated by this Court. What makes this matter even more egregious is the fact that Joseph Suarez is not only an attorney, but a judge in a lower court. As such, he should know how taxing baseless actions are on the Court's already strained resources. Further, he persisted in pursuing this action against BSRB even after this Court cautioned him, on the record in open court, that the Court took a dim view of any effort to unnecessarily delay this case[FN4] and/or to attempt to improperly chill BSRB's representation of The Foundry. Accordingly, as permitted by Court Rule 22 NYCRR §130-1.1(a), the Court imposes a sanction on Mr. Suarez, in the amount of $10,000.00, to be paid to the client security fund within 30 days of the date hereof.The Court also awards BSRB attorney's fees for bringing both the motion to consolidate and/or join Action No. 3 with Action No. 1 and the instant Order to Show Cause, together with costs and disbursement related thereto. BSRB shall file an application for said attorney's fees, costs and disbursements within 15 days of the date of this Order. "


 

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The Red Zone and Cadwalader Legal Malpractice Case

As Christine Simmons of the New York Law Journal reports today:  "Cadwalader Wickersham & Taft failed to defeat a malpractice suit brought by Red Zone, an investment vehicle run by the owner of the Washington Redskins, after a state judge found the firm did not prove it gave adequate warning that a side letter it reviewed may not have limited Red Zone's liability in a proxy fight."  In an unusual turn of events, plaintiff was granted partial  summary judgment. 

Red Zone LLC retained Cadwalader to advise it in connection with a potential acquisition of the entertainment company, Six Flags.  Red Zone owned 8.76% of Six Flags' common voting stock.  Red Zone desired to acquire Six Flags and was advised by Cadwalader in connection with the Engagement Agreement whihc included a $10 million fee to UBS bank.

Disputes arose over the reach of the agreement, and exactly what had to be done to trigger the fee payment.  A side agreement was reached, which ultimately did not benefit Red Zone. It eventually had to pay the $ 10 million.

Supreme Court found that Cadwalader took two inconsistent positions on whether they warned Red Zone, and presented no evidence to create a material issue of fact on the warning. Supreme Court fond that a gap in the side letter was unreasonable as a matter of law, and that problems were easily forseeable.

Result:  Summary judgment to plaintiff.

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Contribution and Indemnity in Legal Malpractice

CIT Lending Serv. Corp. v Morrison & Foerster LLP  2013 NY Slip Op 31980(U)  August 20, 2013
Sup Ct, New York County  Docket Number: 653797/2012  Judge: Melvin L. Schweitzer has a well written discussion of the difference between contribution and indemnity, as well as an exposition on how "pure economic loss" applies to legal malpractice.  We discussed the contribution issues several days ago.  Here are the indemnity issues. 

"Implied Indemnity Claim
Morrison & Foerster amended its complaint to include an implied indemnity claim after the Third-Party Defendants' motion to dismiss. Morrison & Foerster objects to Third-Party Defendant's  attempt to expand their motion to address that separate claim for relief in their reply papers. "[T]he moving party has the option to decide whether its motion should be applied to the new pleadings." Sage Realty Corp. v Proskauer Rose LLP, 251 AD2d 35, 38 (1 st Dept 1998). Morrison & Foerster has fully argued the issues in dispute in its memoranda and sur-reply papers. In favor of judicial efficiency, the Third-Party Defendants motion to dismiss applies to the claim for implied indemnity.
The common law doctrine of implied indemnity permits one who is held vicariously liable, solely on account of the negligence of another, to shift its burden of the loss to the actual wrongdoer. Third Party Defendants argue that in the absence of vicarious liability, the claim for implied indemnity should be dismissed. Although indemnity commonly arises in cases involving an express contract, an implied indemnity obligation may be based upon the law's notion of what is fair and proper between the parties. See Mas v Two Bridges Assoc. by Nat. Kinney Corp., 75 NY2d 680, 690 (1990). Third-Party Defendants argue that the claim for implied indemnity should be dismissed
because Morrison & Foerster is being sued for its own alleged wrongdoing, attorney malpractice, which bears no relation to the Third-Party Defendants' actions. A party cannot seek common law implied indemnification, when its liability is predicated on its own fault. See Bleecker St. Health & Beauty Aids, Inc. v Granite State Ins. Co., 38 AD3d 231, 233 (1st Dept 2007); Mathis v Central Park Conservancy, AD2d 171, 172 (1998). The basis for liability in claims of implied indemnity "arises from the principle that 'every one is responsible for the consequences of his own negligence, and if another person has been compelled ... to pay the damages which ought to have been paid by the wrongdoer, they may be recovered from him. ", Raquet v Braun, 90 NY2d 177, 183 (1997). CIT's malpractice claim against Morrison & Foerster is primarily based on the improper filing of the Building Loan Agreement which, as alleged in the Third-Party Complaint, resulted from the Third-Party Defendants' untimely filing of the Amendment to the Building Loan Agreement.

Morrison & Foerster has properly alleged a claim for implied indemnity against Third- Party Defendants."

 

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Is Legal Malpractice a Tort, Property Damage or Contract?

The Court of Appeals has ruled that the only damages available in legal malpractice are  purely economic.  Dombrowski v Bulson  2012 NY Slip Op 04203 [19 NY3d 347]  "We see no compelling reason to depart from the established rule limiting recovery [*4]in legal malpractice actions to pecuniary damages."  "Wolkstein v Morgenstern, 275 AD2d 635, 637 [1st Dept 2000] ["A cause of action for legal malpractice does not afford recovery for any item of damages other than pecuniary loss so there can be no recovery for emotional or psychological injury"]).

Coming at the issue from a slightly different vantage point, CIT Lending Serv. Corp. v Morrison & Foerster LLP; 2013 NY Slip Op 31980(U); August 20, 2013 Sup Ct, New York County ; Docket Number: 653797/2012 Judge: Melvin L. Schweitzer discusses the effect of a law suit that seeks solely "pure economic loss". 

""[P]urely economic loss resulting from a breach of contract does not constitute 'injury to property' within the meaning of New York's contribution statute [CPLR 1401]" Board of Educ. of Hudson City School Dist. v Sargent, Webster, Chrenshaw & Folley, 71 NY2d 21, 26 (1987). The nature of the industry here differs greatly from the one in Sommer. Insurers have an obligation to deal fairly
and protect the fiscal interest of those insured, not to protect the personal safety of citizens. NY  Univ. v Continental Ins. Co., 87 NY2d at 317 (1995). Insurers' liability is based on contract law, and governed by agreements, terms, provisions, and conditions of the insurance policy. CWbank, NA. v
Commonwealth Land Tit. Ins. Co, 228 AD2d 635, 637 (2d Dept 1996). Though the Third-Party
Defendants' conduct, as alleged here, did violate NY Lien Law 22, statutory law regulates the insurer's performance of its contractual obligation, and it does not impose a separate duty of care. NY Univ, 87 NY2d at 317-318."

Morrison & Foerster argues that its contribution claim is not barred by the pure economic loss doctrine, because a tort claim remains pending against Third-Party Defendants, even if that claim may eventually fail. Sound Refrig. and A. C,Inc. v All City Testing & Balancing Corp., 84 AD3d 1349,1350 (2d Dept 2011). As previously mentioned, the Appellate Divisions have held that merely including an alternative tort claim in a breach of contract action will not create a right of contribution if the plaintiff s sole measure of damages is the lost benefit of the bargain. See e.g. Children's Corner Learning Center v A. Miranda Contracting Corp., 64 AD3d 318 [1 st Dept 2009]; Scalp &  Blade, Inc. v Advest, Inc., 300 AD2d 1 068 (4th Dept 2002); Rothberg v Reichelt, 270 AD2d 760 (3d  Dept 2000)."

Is legal malpractice still a tort?

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A Delay in Filing, a Multitude of Law Suits

Commercial lender makes three loans to building developer.  Lender hires law firm to make necessary filings to protect the loans.  Law firm hires title company to provide title insurance and title insurance company hires another  company to do the physical filing.  A dispute over payment to the law company delays the paper filing, all to disastrous effect.  How might the liability be parsed?

Since we know that a law firm can be held liable in legal malpractice for the acts of its agents, what recourse does the law firm have against the agents?  In CIT Lending Serv. Corp. v Morrison & Foerster LLP  2013 NY Slip Op 31980(U)  August 20, 2013  Sup Ct, New York County  Docket Number: 653797/2012  Judge: Melvin L. Schweitzer discusses the difference between contribution and indemnity.

"Third-Party Defendants' Independent Duty of Care
Morrison & Foerster allege that independent from their obligations under the contract, the Third-Party Defendants agreed to take on the responsibility of filing the Amendment to the Building Loan Agreement and, in doing so, owed a duty of care to CIT to perform that act correctly and in compliance with Section 22 of New York Lien Law. Morrison & Foerster rely heavily on Sommer for the proposition that New York law has recognized a legal duty independent of contractual obligations as an incident to the parties' relationship and the nature of the services covered by the contract. Sommer v Federal Signal Corp.,79 NY2d 540, 551 (1992); See Sound Refri .& A.C., Inc. v All City Testing & Balancing Corp., 84 AD3d 1349 (2d Dept 2011). In Sommer, the plaintiff, a building owner, contracted with the defendant, a fire alarm company, to inform the New York City Fire Department when fire alarms sounded in the building. Because of a misunderstanding between the building engineer and one of the defendant's dispatchers with regard to the reactivation of the fire alarm system, the defendant did not inform the fire department when the alarm went off due to a fire in the building 'one evening. The plaintiff filed a complaint for breach of contract as well as for negligence arising out of the same nucleus of fact. The Court of Appeals allowed both claims noting that: "A legal duty independent of contractual obligations may be imposed by law as an incident to the parties' relationship. Professionals, common carriers and
bailees, for example, may be subject to tort liability for failure to exercise reasonable care, irrespective of their contractual duties. In these instances, it is policy, not the parties' contract, that gives rise to a duty of due care" Sommer v Federal Signal Corp., 79 NY2d at 551-552.
The court noted that "the nature of the injury, the manner in which the injury occurred and the resulting harm" are all relevant in assessing whether a claim for both breach of contract and tort may exist. Id.  An independent duty of care has only been recognized in cases where, as in Sommer, the nature of the industry's services dealt with the protection of people and property from physical harm, and where the failure to perform the contractual obligations with due care could lead to "catastrophic consequences." N. Y Univ. v Continental Ins. Co, 87 NY2d 308 at 317 (1995)
(citing Sommer). Both the nature of the industry's service and the injury claimed by CIT make
Sommer inapplicable here. "

 

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Damages and Breach of Fiduciary Duty

Airey v Remmele 2012 NY Slip Op 22299 ; Supreme Court, Erie County NeMoyer, J. is a case we started to read, and then had to go back to the beginning to sort out. Who would have thought that this story would have happened in the Buffalo area?
 

While this is not a legal malpractice case, it does have implications for the value of damages in a breach of fiduciary duty claim. "The complaint states discrete causes of action for breach of contract, breach of fiduciary duty, negligence, and fraud or misrepresentation (or, more accurately, fraudulent omission of a material fact). The gravamen of each cause of action is that Remmele held herself out to the public and to plaintiff and plaintiff's then wife as a "marital counselor"; that plaintiff and his then wife engaged defendant to provide "marriage counseling" to the couple in an attempt to "reconcile" their "differences"; that as part of such counseling, plaintiff disclosed to defendant intimate details with respect to his "marriage and his relationship"; that plaintiff paid defendant for such counseling; but that plaintiff eventually learned that defendant had a sexual relationship or extramarital affair with plaintiff's wife, leading to the commencement of divorce proceedings between plaintiff and his wife. "

"The Court has no intention here to delineate all of the categories or species of damages that might be recovered by plaintiff upon proof of a breach of a contractual or tort duty allegedly assumed by defendants. The Court would note, however, that it probably would countenance an effort by plaintiff to recover his alleged economic or "out-of-pocket" damages in the form of the loss of the benefit of his bargain with defendants. In other words, this Court would have no problem with plaintiff's recouping any money he had paid [FN2] to defendants specifically for marital counseling if, as alleged, Remmele did not in fact use her best efforts to help the marriage but instead subverted it by embarking on a sexual relationship with plaintiff's wife. Quite simply, the idea that a self-professed counselor could accept and keep a fee earmarked for marriage or relationship counseling despite entering into a secret sexual relationship with one of the counseled parties is beyond this Court's acceptance.

Addressing defendants' challenges to the individual causes of action, the Court concludes that plaintiff has sufficiently alleged the existence of a contract whereby defendants would provide marital counseling to plaintiff and his then wife, and that plaintiff further has sufficiently alleged a breach of that contract and resultant damages. Plaintiff alleges that beginning in 2009 and continuing into 2011, plaintiff engaged the paid services of defendants for the purposes of providing marriage counseling. Although defendants have denied that, they have not done so conclusively, their documentary evidence notwithstanding. Although the e-mail exchange of November 2010 and the more formal written contract of January 2011 certainly tend to show that plaintiff was engaged as a "business coach," neither the exchanged e-mails nor the terse written contract on their face refute the allegation that defendant was already engaged in providing marriage counseling to the couple. Indeed, this Court notes that the November 29, 2010 e-mail from defendant to plaintiff's wife — which e-mail defendant herself describes as having formed the first consultation contract — afforded the couple an $800 "[c]ourtesy, current client discount" from defendants' "[r]egular [c]ost." That contractual term at least arguably buttresses plaintiff's assertion that there was a pre-existent counseling relationship and undermines defendant's contrary assertion. Similarly, and again, the January 28, 2011 meeting summary, which is relied upon by [*5]both parties, tends to show that defendant counseled the couple with regard to their personal or marital relationship as well as their relationship at work.

By the same token, and for similar reasons, the Court concludes that plaintiff has adequately pleaded the essential elements of cause of action for breach of fiduciary duty, professional negligence or malpractice, and fraudulent concealment. These causes of action present a somewhat closer question for the Court, however, given defendant's apparent lack of State licensing or other recognized professional credentials or certification as a psychologist, social worker, therapist, or the like. Nevertheless, it appears to the Court that defendant may have held herself out to the public as someone qualified to counsel individuals or couples in their relationships, including their marriages, and that indeed is plaintiff's explicit allegation. Thus, the Court concludes, plaintiff has sufficiently alleged the existence of a fiduciary duty [FN3] and other relationship of trust between himself and defendant, defendant's breach thereof,

defendant's exploitation of intimate information, and defendant's concealment of the arguably material fact that, while purporting to counsel the couple in their marriage, defendant was having a sexual affair with plaintiff's wife.[FN4] Further, plaintiff has sufficiently alleged that defendant provided negligent and careless counseling to plaintiff and did not possess the ordinary skill, knowledge, or ability of those holding themselves out to the public as marriage counselors.

Concerning plaintiff's demand for punitive damages, the fact is that punitive damages might well be recoverable upon proof of defendants' commission of fraud and possibly their breach of fiduciary duty and negligence as well (see Dupree, 87 AD3d at 978 [upholding punitive damages award against physician who assumed role as plaintiff's mental health therapist but who had sexual affair with her]). Any such award would be aimed at punishing the wrongdoer and deterring similar conduct by others (see Laurie Marie M. v Jeffrey T.M., 159 AD2d 52, 59 [2d Dept 1990], affd 77 NY2d 981 [1991]; Peters v Newman, 115 AD2d 816, 817 [3d Dept 1985], appeal dismissed 67 NY2d 916 [1986]; see also Le Mistral, Inc. v Columbia Broadcasting Sys., 61 AD2d 491, 494 [1st Dept 1978], appeal dismissed 46 NY2d 940 [1979] [citing 14 NY Jur, Damages, § 176 for proposition that "exemplary damages are [generally] recoverable in all actions ex delicto based upon tortious acts which involve ingredients of malice, fraud, oppression, insult, wanton or reckless disregard of the plaintiff's rights, or other circumstances of aggravation, as a punishment of the defendant and admonition to others"]; see generally Walker v Sheldon, 10 NY2d 401, 404-405 [1961]). Thus, punitive damages may be awarded where the [*6]wrong complained of is "actuated by evil and reprehensible motives" (Walker, 10 NY2d at 404), is "intentional and deliberate, and has the character of outrage frequently associated with crime" (Prozeralik v Capital Cities Communications, 82 NY2d 466, 479 [1993], quoting Prosser and Keeton, Torts § 2, at 9 [5th ed 1984] [internal quotation marks omitted]). However, such punitive damages may be awarded only in proportion to any actual injury inflicted by the defendant (see generally Correia v Suarez, 52 AD3d 641 [2d Dept 2008]).

Here, in the absence of an order dismissing the tort causes of action, there is no basis for ruling out any claim for punitive damages that might be premised thereon, certainly not at the threshold. Plaintiff is entitled to explore through discovery defendant's alleged conduct, both with respect to this couple and in general.

Accordingly, the motion of defendants to dismiss the complaint is DENIED, although it is DETERMINED as a matter of law that plaintiff may not recover damages, including for emotional distress, on account of the sexual relationship between defendant and plaintiff's then wife or the consequent damage to or destruction of the marriage.
 

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Buying A Legal Malpractice Case and Then Losing the Receipt

Well, actually not "buying" the case and not losing the "receipt", nevertheless, plaintiff purchased 50% of an intended legal malpractice case and then lost the contract...or did he?

Pearlman v Faulisi  2013 NY Slip Op 31963(U)  August 7, 2013  Supreme Court, Suffolk County
Docket Number: 15123-2011  Judge: Emily Pines.  "In the Amended Verified Complaint, the plaintiff, Lee R. Pearlman (“Plaintiff’) alleges, among other things, that on or about July 13, 2007, he tendered $125,000 to defendant Peter Faulisi (“Faulisi”) in accordance with an agreement with Faulisi pursuant to which Plaintiff “purchased the rights to one half of any and all proceeds payable or attributable to Faulisi, whether directly from Faulisi’s claims in [a legal malpractice action pending in Federal court] or from his share of any monies paid to Protostorm, in an anticipated legal malpractice lawsuit to be brought by Protostorm and Faulisi against various attorneys.” Plaintiff alleges that he and Faulisi entered into a written contract regarding the Protostorm case and that Faulisi maintained sole custody of the written contract. Plaintiff claims that after they entered into the contract, Faulisi failed to respond to Plaintiffs repeated requests for a copy of the contract and documents regarding the Protostorm case. In the First cause of action, Plaintiff seeks a declaratory judgment and accounting from the defendants declaring that Plaintiff is entitled to 50% of Faulisi’s proceeds from the Protostorm case. In the Second cause of action, Plaintiff
seeks equitable relief (injunction, attachment, receivership) to safeguard Faulisi’s proceeds from the Protostorm case given what Plaintiff calls Faulisi’s extensive pattern of fraud, deceit and unsavory business practices. A copy of the alleged written contract is not annexed to the Amended Verified Complaint. Neither party produced the original or a copy of the written contract during discovery."

Defendants now move (Mot. Seq. 002) for summary judgment dismissing the First  and Second causes of action. In an affidavit in support of Defendants’ motion, Faulisi states, among other things, that the $125,000 check given to him by Pearlman on July 13, 2007, was a personal loan, and that there was no arrangement of any kind, or even any discussion, that the $125,000 was in exchange for a 50% interest in the Protostorm case. Defendants argue, among other things, that Plaintiff cannot meet his burden of demonstrating the existence of an enforceable contract between the parties because there is no writing signed by the parties containing the terms of such an agreement. Defendants contend that the $125,000 was nothing more than a loan between  Pearlman and Faulisi, to be repaid when Faulisi or Lean for Life Products, LLC, a start-up company of which Faulisi is Chief Operating Officer, had sufficient funds. "

Here, the Defendants allege that a written agreement forming the basis of the First and Second causes of action asserted by the Plaintiff never existed and contend that summary judgment must be granted because Plaintiff cannot produce the agreement and, therefore, cannot prove the existence of an enforceable contract. However, the Defendants cannot satisfy their initial burden by merely pointing to gaps in Plaintiff‘s case (see Johnson v Culinary Institute of America, 95 AD3d 1077, 1078 [2d Dept 2012). Moreover, the Defendants have failed to establish, as a matter of law, that secondary evidence of the contents of the agreement would be inadmissible at trial under the best evidence rule (see Schozer v William Penn Life Ins. Co. ofNew York, 84 NY2d 639,644
[1994]; Matter of Eshaghian; 100 AD3d 751, 752 [2d Dept 2012). "

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How Many Mistakes?

Reading this case produces an image of a train rolling through the countryside, without anyone at the controls. It is the story of a car accident, an unjoined party, and mistake after mistake. In the end plaintiffs are non-suited and all the efforts are for naught.

Di Giacomo v Michael S. Langella, P.C. 2012 NY Slip Op 32658(U)  Supreme Court, Suffolk County Docket Number: 08-7307 Judge: John J.J. Jones J

This action for legal malpractice was commenced to recover damages allegedly sustained by the
plaintiffs as the result of the failure of the defendants to properly present a motion to vacate the dismissal of the plaintiffs’ underlying action for personal injuries. On May 23, 2000, the plaintiff Lisa Di Giacomo Frangione (Di Giacomo) was involved in a motor vehicle accident. In May 2000, the plaintiffs retained Ira Levine, Esq. (Levine), to commence an action against Barbara Daniels (Daniels), the owner and operator of the other vehicle involved in the underlying accident. On September 18, 2003, the plaintiff executed a Consent to Change Attorney substituting Hankin, Handwerker & Mazel, PLLC (HHM) as her attorneys in place of Levine. Depositions in the personal injury action were conducted on or about April 2,2004, and Daniels testified that at the time of the accident she had been operating her vehicle in the course of her employment with Weight Watchers. After the underlying action (or Daniels action) had been placed on the trial calendar, HHM moved for leave to withdraw as counsel for the plaintiffs. By order of the Court dated May 15, 2006 (Molia, J.), the motion was granted, counsel was directed to serve a copy of the order on the plaintiffs on or before May 19, 2006, and the discharge was to be effective ten days after filing proof of service. In addition, the order set down July 12,2006 as the date for jury selection. When the plaintiffs failed to appear for jury selection on July 12,2006, the matter was adjourned until July 19, 2006. The record before this Court reveals that the plaintiffs again failed to appear on July 19,2006, and upon oral application made on the record by defense counsel in the underlying action, the action was dismissed with prejudice by the Honorable Denise F. Molia. On or about August 9,2006, the plaintiff retained the defendants to represent them in the underlying action. The defendants prepared and submitted an order to show cause dated August 10, 2006, seeking to vacate the plaintiffs default and to restore the case to the trial calendar. By order dated November 16, 2006, the Court (Molia, J.) denied the plaintiffs’ motion to vacate their default ."

"On February 20, 2008, the plaintiffs commenced this action for legal malpractice against Levine,
HHM, Stacy Rinaldi Guzman, Esq. (Guzman), and the defendants. Among the allegations set forth in the complaint is a claim that the failure to timely join Weight Watchers ( Daniel’s employer) as a party in the underlying action constituted malpractice. In addition, it is asserted that after HHM was relieved as plaintiffs’ counsel, the plaintiffs were represented by Guzman, who had agreed to appear on the plaintiffs’ behalf to obtain an adjournment of the July 12,2006 court date, but failed to do so. It is further alleged that the defendants failed to include an affidavit of merits with the motion to vacate the dismissal of the plaintiffs’ underlying action resulting in its denial, and the loss of the plaintiffs’ ability to recover damages for their injuries.In early 2008, Levine, HHM, Guzman and the defendants separately moved to dismiss the plaintiffs’ complaint on the grounds, among other things, that it failed to state a cause of action. By order dated October 30,2008, the undersigned granted the motions of Levine, HHM and the defendants, dismissing the complaint against them. By order entered on January 12, 2009, the undersigned granted Guzman’s motion, dismissing the complaint against her. After the plaintiffs’ appealed from the judgments entered pursuant to those orders, the Decision and Order of the Appellate Division, Second Department, dated September 14, 20 10, affirmed the dismissal of the complaints against Levine, HHM and Guzman, and reversed that branch of the order dismissing the complaint against the defendants. In a stipulation dated June 15, 20 1 1, the parties agreed to amend the caption to reflect the dismissals in favor of Levine, HHM and Guzman. Said stipulation was so ordered on July 13, 201 1, and filed with the Clerk of the Supreme Court on July 18,2011. Thereafter, the action proceeded against the defendants and, after all discovery was completed, a compliance order dated September 7,201 1, directed the plaintiffs to file a note of issue on or before October 7, 201 1. The computerized records maintained by the Court reflect that the plaintiffs filed a note of issue on October 28, 201 1, resulting in the caption set forth above.’

"At his deposition, the defendant Michael S. Langella (Langella) testified that he was retained by
the plaintiffs on or about August 9,2006, to attempt to vacate the dismissal of the underlying action, to restore the action to the trial calendar, and to litigate that action. He decided to move by order to show cause as quickly as possible to avoid a claim by Daniels that she was prejudiced in the interim. Langella indicated that he was aware of the legal standard required to vacate a default, and that his affirmation and the affidavit of Di Giacomo, submitted in support of the order to show cause, established that the plaintiffs had meritorious causes of action against Daniels. He acknowledged that the order to show cause did not state how the accident happened, and that the court order denying the motion stated that it was denied because it did not contain any proof regarding the merits of the plaintiffs’ action against Daniels. Langella further testified that he was aware of the facts surrounding the dismissal of the Daniels action, and that the case had been on the trial calendar and adjourned a number of times. He indicated that he spoke with Levine by telephone to corroborate the plaintiffs’ claim that Di Giacomo had spoken with Guzman to obtain an adjournment of the July 12, 2006 court date, that he did not advise the plaintiffs that they had a legal malpractice claim against Levine, and that he did not receive the plaintiffs’ file from HHM until October 10, 2006. He stated that he handled a subsequent motion to reargue the denial of the order to show cause differently, attaching a doctor’s affirmation and Levine’s affirmation. Langella testified that the written retainer signed by the plaintiffs provides that he and his firm were going to represent them to collect compensation for their injuries in the car accident, and to sue any persons or entities that may be liable to them for damages under the law. He indicated that the retainer stated that the plaintiffs would be responsible for the costs of any appeals, but that he did not charge them for the costs of the two appeals that he prosecuted on their behalf in the Daniels action. He stated that “based on the circumstances here, I believed that it was my obligation to undertake those costs and responsibilities.” He believed that Di Giacomo should have been compensated for the injuries that she suffered in the car accident. Langella further testified that the plaintiffs’ actions did not contribute lo the denial of the motion to vacate their default, that he was not aware of any third party that would be responsible for the plaintiffs’ damages during his representation of them, that he was not aware of any issues regarding privity of contract regarding the subject retainer, and that he is not claiming that he made any errors in judgment in representing the plaintiffs. He further stated that he had no knowledge that would indicate that the plaintiffs are not the real parties in interest in this action, and that he did not have any facts that would support a claim that this action is barred by the statute of limitations, or that the plaintiffs lack standing to bring this action
 

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How Many Mistakes?

Reading this case produces an image of a train rolling through the countryside, without anyone at the controls. It is the story of a car accident, an unjoined party, and mistake after mistake. In the end plaintiffs are non-suited and all the efforts are for naught.

Di Giacomo v Michael S. Langella, P.C. 2012 NY Slip Op 32658(U)  Supreme Court, Suffolk County Docket Number: 08-7307 Judge: John J.J. Jones J

This action for legal malpractice was commenced to recover damages allegedly sustained by the
plaintiffs as the result of the failure of the defendants to properly present a motion to vacate the dismissal of the plaintiffs’ underlying action for personal injuries. On May 23, 2000, the plaintiff Lisa Di Giacomo Frangione (Di Giacomo) was involved in a motor vehicle accident. In May 2000, the plaintiffs retained Ira Levine, Esq. (Levine), to commence an action against Barbara Daniels (Daniels), the owner and operator of the other vehicle involved in the underlying accident. On September 18, 2003, the plaintiff executed a Consent to Change Attorney substituting Hankin, Handwerker & Mazel, PLLC (HHM) as her attorneys in place of Levine. Depositions in the personal injury action were conducted on or about April 2,2004, and Daniels testified that at the time of the accident she had been operating her vehicle in the course of her employment with Weight Watchers. After the underlying action (or Daniels action) had been placed on the trial calendar, HHM moved for leave to withdraw as counsel for the plaintiffs. By order of the Court dated May 15, 2006 (Molia, J.), the motion was granted, counsel was directed to serve a copy of the order on the plaintiffs on or before May 19, 2006, and the discharge was to be effective ten days after filing proof of service. In addition, the order set down July 12,2006 as the date for jury selection. When the plaintiffs failed to appear for jury selection on July 12,2006, the matter was adjourned until July 19, 2006. The record before this Court reveals that the plaintiffs again failed to appear on July 19,2006, and upon oral application made on the record by defense counsel in the underlying action, the action was dismissed with prejudice by the Honorable Denise F. Molia. On or about August 9,2006, the plaintiff retained the defendants to represent them in the underlying action. The defendants prepared and submitted an order to show cause dated August 10, 2006, seeking to vacate the plaintiffs default and to restore the case to the trial calendar. By order dated November 16, 2006, the Court (Molia, J.) denied the plaintiffs’ motion to vacate their default ."

"On February 20, 2008, the plaintiffs commenced this action for legal malpractice against Levine,
HHM, Stacy Rinaldi Guzman, Esq. (Guzman), and the defendants. Among the allegations set forth in the complaint is a claim that the failure to timely join Weight Watchers ( Daniel’s employer) as a party in the underlying action constituted malpractice. In addition, it is asserted that after HHM was relieved as plaintiffs’ counsel, the plaintiffs were represented by Guzman, who had agreed to appear on the plaintiffs’ behalf to obtain an adjournment of the July 12,2006 court date, but failed to do so. It is further alleged that the defendants failed to include an affidavit of merits with the motion to vacate the dismissal of the plaintiffs’ underlying action resulting in its denial, and the loss of the plaintiffs’ ability to recover damages for their injuries.In early 2008, Levine, HHM, Guzman and the defendants separately moved to dismiss the plaintiffs’ complaint on the grounds, among other things, that it failed to state a cause of action. By order dated October 30,2008, the undersigned granted the motions of Levine, HHM and the defendants, dismissing the complaint against them. By order entered on January 12, 2009, the undersigned granted Guzman’s motion, dismissing the complaint against her. After the plaintiffs’ appealed from the judgments entered pursuant to those orders, the Decision and Order of the Appellate Division, Second Department, dated September 14, 20 10, affirmed the dismissal of the complaints against Levine, HHM and Guzman, and reversed that branch of the order dismissing the complaint against the defendants. In a stipulation dated June 15, 20 1 1, the parties agreed to amend the caption to reflect the dismissals in favor of Levine, HHM and Guzman. Said stipulation was so ordered on July 13, 201 1, and filed with the Clerk of the Supreme Court on July 18,2011. Thereafter, the action proceeded against the defendants and, after all discovery was completed, a compliance order dated September 7,201 1, directed the plaintiffs to file a note of issue on or before October 7, 201 1. The computerized records maintained by the Court reflect that the plaintiffs filed a note of issue on October 28, 201 1, resulting in the caption set forth above.’

"At his deposition, the defendant Michael S. Langella (Langella) testified that he was retained by
the plaintiffs on or about August 9,2006, to attempt to vacate the dismissal of the underlying action, to restore the action to the trial calendar, and to litigate that action. He decided to move by order to show cause as quickly as possible to avoid a claim by Daniels that she was prejudiced in the interim. Langella indicated that he was aware of the legal standard required to vacate a default, and that his affirmation and the affidavit of Di Giacomo, submitted in support of the order to show cause, established that the plaintiffs had meritorious causes of action against Daniels. He acknowledged that the order to show cause did not state how the accident happened, and that the court order denying the motion stated that it was denied because it did not contain any proof regarding the merits of the plaintiffs’ action against Daniels. Langella further testified that he was aware of the facts surrounding the dismissal of the Daniels action, and that the case had been on the trial calendar and adjourned a number of times. He indicated that he spoke with Levine by telephone to corroborate the plaintiffs’ claim that Di Giacomo had spoken with Guzman to obtain an adjournment of the July 12, 2006 court date, that he did not advise the plaintiffs that they had a legal malpractice claim against Levine, and that he did not receive the plaintiffs’ file from HHM until October 10, 2006. He stated that he handled a subsequent motion to reargue the denial of the order to show cause differently, attaching a doctor’s affirmation and Levine’s affirmation. Langella testified that the written retainer signed by the plaintiffs provides that he and his firm were going to represent them to collect compensation for their injuries in the car accident, and to sue any persons or entities that may be liable to them for damages under the law. He indicated that the retainer stated that the plaintiffs would be responsible for the costs of any appeals, but that he did not charge them for the costs of the two appeals that he prosecuted on their behalf in the Daniels action. He stated that “based on the circumstances here, I believed that it was my obligation to undertake those costs and responsibilities.” He believed that Di Giacomo should have been compensated for the injuries that she suffered in the car accident. Langella further testified that the plaintiffs’ actions did not contribute lo the denial of the motion to vacate their default, that he was not aware of any third party that would be responsible for the plaintiffs’ damages during his representation of them, that he was not aware of any issues regarding privity of contract regarding the subject retainer, and that he is not claiming that he made any errors in judgment in representing the plaintiffs. He further stated that he had no knowledge that would indicate that the plaintiffs are not the real parties in interest in this action, and that he did not have any facts that would support a claim that this action is barred by the statute of limitations, or that the plaintiffs lack standing to bring this action
 

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Multi-State Complex Legal Malpractice Award

In the construction industry, bonding is extremely important.  Huge jobs, and large expenditures of money are based upon the belief that there is a pot of money protecting the process.  Sub-contractors provide work and materials on the basis that there is someone who will pay, eventually.  Sometimes it goes wrong, and a wedge of the legal industry is devoted to construction litigation.  Injuries, as well as provision of work and materials are constantly being litigated.

In Phoenix Erectors LLC v Fogarty  2013 NY Slip Op 31936(U)  August 14, 2013  Supreme Court, New York County  Docket Number: 100701/10 Judge: Louis B. York we see a case that has been dismissed, appealed, reversed and sent back, now to plaintiff's successful motion for summary judgment.

"Plaintiff is a construction company, which was hired as a subcontractor by Hera Construction, Inc. (Hera) in connection with the construction of a monorail in Newark Airport, in New Jersey (project).
Hera was also the principal under a Subcontractor Labor and Material Payment Bond No. B99-020680 (bond), issued by Ulico Casualty Company (Ulico), as surety for amounts Hera was
obligated to pay subcontractors on the project. The bond, which was for $1,600,000, contained a forum selection clause requiring that Ulico could only be sued in the United States District Court
of the jurisdiction in which the bonded project was situated, here, New Jersey. A pay dispute arose between Phoenix and Hera, in which Phoenix claimed it was due approximately $180,000. Apparently, Hera got wind of plaintiff’s decision to commence a suit against Hera and Ulico in the New Jersey District Court, and commenced a peremptory suit against plaintiff in Supreme Court, Suffolk County, New York, in January 2002 (Hera Construction, Inc. v Phoenix Erectors, LLC., Index No. 00044/02)(Suffolk County action), seeking damages for plaintiff’s alleged failure to provide materials to the project, Fogarty was retained by plaintiff to represent it in the Suffolk County action. Fogarty served an answer on Hera, on plaintiff’s behalf, in April 2002. Plaintiff obtained New Jersey counsel, John Rittley (Rittley), to prosecute an action against Hera and Ulico in the United State District Court, District of New Jersey (New Jersey action). against Hera sounding in breach of contract, plaintiff brought a claim for payment against Ulico under the bond. Besides bringing claims in the New Jersey action Fogarty moved to dismiss the Suffolk County action, claiming
lack of jurisdiction and forum non conveniens. The motion, and a motion for reargument, were denied, based on a forum selection clause in the Hera-Phoenix contract calling for suits against
Hera to be brought in Suffolk County. Hera then moved in the New Jersey action to be dismissed
from the action based on the same forum selection clause. This motion was granted, and the New Jersey action continued against Ulico without Hera. At some point, Fogarty contacted Rittley to discuss adding Ulico to the Suffolk County action. The court notes that Ulico inserted a second affirmative defense in its answer, claiming that the New Jersey action should be dismissed, as the proper venue to settle disputes among plaintiff, Hera and Ulico was in Suffolk County, because Ulico’s forum selection clause was subordinate to Hera’s. Fogarty apparently never saw Ulico‘s
answer in the New Jersey action. Fogarty and Ulico‘s counsel discussed Ulico’s insertion into
the Suffolk County action. Apparently, Ulico refused to enter into a stipulation to become a defendant in a direct action against it, but agreed to stipulate to becoming a third-party
defendant in the Suffolk County action, waiving all jurisdictional defenses."

"W&M’s creative summation of the gist of plaintiff‘s complaint does not reflect the actual cause of action plaintiff has brought, and which the Appellate Division recognized in its decision. Plaintiff is claiming that it would have obtained a better result in the underlying litigations if it had been able
to pursue a direct action against Ulico in either New York or New Jersey, because Ulico is a solvent company whose bond covered the subject matter of the payment dispute, and that a judgment against Ulico would have been a more favorable outcome for plaintiff, since the judgment obtained against Hera implicated Ulico's bond, so that the bond would have been available to pay that judgment. Plaintiff is alleging that Fogarty failed to protect plaintiff's valid and valuable action against Ulico, in that he should have either gotten a stipulation allowing for a direct
action against Ulico in New York, waiving the statute of limitations, or, failing that, refused to permit Rittley to execute the New Jersey stipulation, so that the direct action could have proceeded against Ulico in New Jersey. Plaintiff is essentially faulting Fogarty for believing, without actual knowledge, that plaintiff could not sue Ulico in the New Jersey action without Hera, and not being aware that a third-party suit in New York was useless as a means to collect from Ulico."

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Big Business, Big Loans, Bankruptcy, Legal Malpractice?

Businesses grow huge, make multi-million dollar loans (read: $ 125 million+) and buy/sell huge ongoing and decrepit stores.  How do they go astray?  We see one example in Ableco Fin. LLC v Hilson  2013 NY Slip Op 05665   Decided on August 20, 2013   Appellate Division, First Department .  Was it attorney error, or merely a delusional business deal?
 

"Plaintiff is in the business of making commercial loans. This action for legal malpractice stem from a $125 million loan that plaintiff made to BH S & B Holdings LLC (Bay Harbor) in August 2008. The loan was made to finance Bay Harbor's purchase of certain assets from the bankruptcy estate of S & B Industries, Inc. (Steve & Barry's), a retail clothing chain. According to the controlling asset purchase agreement, Bay Harbor's desire was "to purchase substantially all the assets and to assume certain lease and other obligations of [Steve & Barry's] with the present intention of operating the Business as a going concern." Plaintiff retained defendants on August 14, 2008 and the loan closed on August 26, 2008. Without repaying the loan, Bay Harbor filed its own bankruptcy petition in November 2008.

Plaintiff alleges, with respect to the credit card receivables claim, that defendants committed legal malpractice by failing to advise it that, after the closing, the cash proceeds of credit card sales of Bay Harbor's inventory would be deposited in a Steve & Barry's bank account on which plaintiff had no lien. Under the inventory claim, plaintiff alleges that defendants failed to adequately advise it that its first priority security interest on Bay Harbor's assets was collateralized by only a portion of the Steve & Barry's inventory as opposed to the entire inventory. Plaintiff alleges that it would not have made the loan had defendants provided it with proper legal advice that it was not acquiring a first priority lien on the entire Steve & Barry's inventory.

The credit card receivables claim was properly dismissed because the record establishes that before making the loan plaintiff knew that agreements creating its liens on the bank accounts would not be negotiated and executed until after the closing. The inventory claim should have [*2]also be dismissed on the basis of information plaintiff indisputably possessed prior to the August 26, 2008 closing.

Defendants deposed Kevin Genda, plaintiff's vice chair who was in charge of all of its lending activities. After negotiating the loan's basic terms, Genda, on behalf of plaintiff, retained defendants on or about August 14, 2008. Ten days earlier, Bay Harbor and Steve & Barry's had entered into an asset purchase agreement (APA). Under the terms of the APA, the Steve & Barry's inventory purchased by Bay Harbor excluded inventory that constituted GOB (going out of business) inventory. The APA defined "GOB Assets" as "all owned Merchandise and Furniture and Equipment located at Store Closing Locations" as opposed to locations at which Bay Harbor intended to assume the Steve & Barry's lease obligations and operate the business as a going concern. According to a term sheet that was transmitted on August 15, 2008 by Paul Lusardi, plaintiff's senior vice president, the collateral for the loan was to consist of "a perfected first priority security interest in all existing and future assets of Borrower." The term sheet lists Newco (Bay Harbor) as the only "Borrower."

The record also contains an August 14, 2008 email to Lusardi from Nate Land, a member of plaintiff's deal making team. Attached to the email is a press release about the bankruptcy court's approval of the APA. The press release reads, in part: "The assets to be acquired include but are not limited to . . . all Steve & Barry's merchandise, with the exclusion of any product located at stores not purchased by [Bay Harbor] [emphasis added] . . ." The foregoing documentary evidence refutes plaintiff's pivotal claim that it made the loan on August 26, 2008 without knowing that it was not getting a first priority lien on the entire Steve & Barry's inventory. "

 

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Two Intertwined Concepts in Legal Malpractice

Time limitations and continuing representation are a constant issue in legal malpractice cases.  When the statute begins to run and how long it may be tolled are sub-issues.  Cordero v Koval Rejtig & Dean PLLC2013 NY Slip Op 31893(U) ;  August 8, 2013;  Supreme Court, New York County ;  Docket Number: 113450/11; Judge: Debra A. James gives us a nice discussion of both.

"The statute of limitations for attorney malpractice is three years (CPLR 214 [ 6 ] ) . A claim for legal malpractice accrues when the attorney commits the malpractice, not when the client discovers it (Shumsky v Eisenstein, 96 NY2d 164, 166 [lst Dept 20011). A client's ignorance of his or her attorney's misconduct has no effect on when a claim for malpractice accrues (Lincoln Place, LLC v RVP Consulting, 70 AD3d 594, 594-595 [lst Dept, 2010). The accrual of the limitations period may be tolled according to the continuous representation doctrine."
 

"Plaintiff contends that the action accrued on December 5,2008, when his personal injury case  was dismissed, and that he had until December 5, 2011 to sue defendants. Plaintiff relies on case law stating that a legal malpractice claim accrues "\when all the facts necessary to the cause of action have occurred and an injured party can obtain relief in court'" (McCoy v Feinman, 99 NY2d 295, 301 [2002] , quoting Ackerman v Price Waterhouse, 84 NY2d 535, 541 [1994]). He argues that, until his case was dismissed, he did not have an action against defendants. Plaintiff misstates the applicable law. Plaintiff had a claim against defendants before his case was dismissed, even if he was ignorant of that fact. Where it is alleged that an attorney negligently let pass the statute of limitations for the client's action, the claim for legal malpractice accrues upon the
expiration of that statute of limitations (Cohen v Wallace & Minchenberg, 39 AD3d 691, 692 [2d Dept 20071; Baker v Levitin, 211 AD2d 507, 507 [1st Dept.1951)."

"As defendants implicitly point out, Koval's continuous representation of plaintiff can be imputed to defendants. In Antoniu v Ahearn (134 AD2d 151 [lst Dept 1987]), the plaintiff hired the first attorney and her law firm in 1978. 1981 or 1982, the first attorney left that firm and joined In another firm, where she continued to represent plaintiff. Upon hiring a new attorney, plaintiff fired the first attorney in July 1983. On October 10, 1985, plaintiff began an action against the firm retained in 1978. The court determined that the action against the firm that plaintiff retained in 1978 was within the statute of limitations. The limitations period against that firm was tolled until the first attorney stopped representing the plaintiff. The first attorney's continuing representation, which
stopped in 1983, was imputed to the firm."

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Fraud or Malpractice?

In this case, the court permits client to plead fraud even though legall malpractice is time barred. Why? Unsophisticated client retains attorney for a first time purchase of a business. Attorney undertakes complicated transaction for $ 3000. As soon as the contract is ready, attorney tells client to sign a wavier, and then seems to have a conflict of interest and starts to represent the landlord and undertakes to evict the client.'

Hernandez v Marquez 2012 NY Slip Op 31112(U) Supreme Court, New York County Docket Number: 103531/11 Judge: Joan A. Madden:

"In October 2007, Hernandez retained Marquez, an attorney, who represented to her that he was competent to handle all aspects of the purchase of a restaurant and the acquisition of a liquor license. (Amended Complaint, 7 3). Hernandez “made it very clear to [Marquez] that she had never purchased a business before this particular purchase transaction, that she had no experience purchasing a business and that she had to rely on him completely for all aspects of the purchase of the restaurant with a liquor license.” (u 7 4). Marquez “promised that he would perform in the manner required by [Hernandez] and that she had nothing to worry about [if] she contracted with him” (a 7 5). In consideration for these promises to properly handle the purchase of the restaurant and the acquisition of the liquor license, Hernandez paid Marquez $3,000.

In reliance of Marquez’s advice, including representations that the liquor license could be transferred from the seller, so long as Hernandez was not convicted of any crimes, Hernandez contracted with the seller to purchase the business. (Ig 7 8). The purchase was accomplished through a Stock Transfer Agreement entered into on October 2,2007, a copy of which is annexed to the proposed amended complaint. The Agreement made the obtaining of a liquor license for the Restaurant a condition of the purchase. As soon as she told Marquez that she was not convicted of any crimes, Marquez had her sign a waiver, which states in pertinent part: Parties represent and state that notwithstanding anything to the contrary in documents for the above purchase, that [Hernandez Is irrevocably purchasing said store and waives condition of approval by the State of New York Liquor Authority and Beverage Control Board, and further states that he/she is qualified
for an off-premises beer license,After signing the waiver, Hernandez paid the seller $30,000 as a down payment for the business, at which time Marquez advised Hernandez to pay for the seller’s landlord $10,000 rent arrears due and owing from the seller, and instructed Hernandez to execute a new lease with the landlord, which required $5,250 as a security deposit and as monthly rent ( 7 19). There may have been a conflict of interest that caused Marquez to have Hernandez sign the waiver, since Marquez now represents the landlord in an action to evict Hernandez from her apartment 18). If Marquez had told Hernandez the truth about the waiver, Hernandez would not have gone through with the purchase of the restaurant until she had secured a liquor license. 7 20).
However, “[s]olely due to assurances, representations, advice and direction of the Marquez,
Hernandez was caused ... to close the transaction with no approval from the State Liquor
Authority.”

Due to Marquez’s misrepresentations and omissions, “includ[ing] his directing Hernandez to execute a lease and pay rent of $5,250 a month, which she paid for over a year, for a premises which she believed that she would have a restaurant and liquor license,” Hernandez suffered damages (Id, 7 27). As a result of her reliance on Marquez’s representations, Hernandez alleges that she had become indebted to the seller for $91,350,000.In addition, contrary to Marquez’s representations, the liquor license for the restaurant could not be secured.
 

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Accounting Malpractice and Continuous Representation

Accounting malpractice, like any other variant of professional malpractice (attorneys, brokers, financial professionals) are all subject to a three year statute of limitations, which may be tolled for continuous representation.  In Ghiz v Schreck & Co.  2013 NY Slip Op 31869(U)  August 9, 2013
Sup Ct, New York County Docket Number: 158805/2012  Judge: Eileen A. Rakower we see a description of the application of continuous representation.

"A cause of action charging that a professional failed to perform services with due care and in accordance with the recognized and accepted practices of the profession is governed by the three-year statute of limitations applicable to negligence actions. (See, CPLR §214[6).
 

As set forth in ATC Healthcare Inc. v. Goldstein, Golub & Kessler LLP, 28 Misc. 3d 1237(A), *3 (N.Y. Sup. July 26, 2010):

The continuous representation doctrine is an exception to the Statute of Limitations and applies only where there is a mutual understanding of the need for further representation on the specific subject matter underlying the malpractice claim. Symbol Technologies, Inc. v. Deloitte & Touche, LLP, supra, at p. 195 (citation omitted). That is, "the continuous representation must be in connection with the particular transaction which is the subject of the action and not merely during the continuation of a general professional relationship." Zaref v. Berk & Michaels, P. c., 192 A.D.2d 346, 347-48 (1 st Dept. 1993) (citations omitted). "[T]he facts are required to demonstrate
continued representation in the specific matter directly under dispute." Zaref v. Berk & Michaels, P. c., supra, at p. 348.


ATC Healthcare Inc., 28 Misc. 3d 1237(A) at *3.


Schreck contends that Plaintiffs' accounting malpractice claim is time barred because Plaintiffs filed the Complaint in the present action on December 12, 2012, more than three years after the embezzlement was allegedly discovered on August 27, 2009 and argues that it did not continue to represent Plaintiffs specifically with respect to the embezzlement because it "could not have done anything in any ongoing capacity to 'correct' or 'mitigate' the embezzlement." However, the Complaint alleges that "Defendant Schreck continuously represented plaintiffs regarding claims
by various government bodies as to said tax penalties and liabilities up and until September 2012 as well as rendered its usual and customary services to plaintiffs and attempted to restate and correct the mistakes made during the period of defendant Schreck's malfeasance."

 

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Sexual Abuse and Judiciary Law 487

Legal malpractice, and its cousin deceit might be found anywhere attorneys tend problems.  One fairly startling setting is the Poly Prep sex abuse litigation.  Like the similar Horace Mann sexual abuse litigation, there are numerous claims of concealment and lying. Andrew Keshner writes in today's New York Law Journal that former students have filed a Judiciary Law 487 claim against Poly Prep's outside counsel O'Melveny & Myers.

'Former students who settled a lawsuit alleging a prestigious private school in Brooklyn covered up a football coach's years of sexual abuse are now suing the school's outside counsel at O'Melveny & Myers for allegedly trying to "deceive" the court with "fraudulent evidence" and "materially false and fraudulent statements."

Naming O'Melveny and Jeffrey Kohn, managing partner of the firm's New York office, as defendants, the action argues they "should not be allowed to escape sanction for their grievous and oft-repeated falsehoods."

The lawsuit, Zimmerman v. Kohn, 652826/2013, was filed Aug. 11 in Manhattan Supreme Court (See Complaint). It demands that, in addition to other things, O'Melveny reimburse the plaintiffs for $2 million in legal fees expended to achieve a confidential settlement. In addition, the plaintiffs are seeking that all fees paid to O'Melveny by Poly Prep Country Day School be turned over to the plaintiffs.

O'Melveny scoffed at the claims.

"The underlying case was concluded nine months ago with a settlement voluntarily entered into by the plaintiffs. These claims are completely baseless and without merit," the firm said in a statement.

The current suit arises from a lawsuit 10 alumni and two former summer camp participants filed against the school and its officials in 2009 for allegedly concealing abuse that occurred from 1966 to 1991 by coach Philip Foglietta. The coach died in 1998 after working 25 years at the school.

After Eastern District Judge Frederic Block (See Profile) ruled last August that some claims could proceed in Zimmerman v. Poly Prep Country Day School, 09-cv-4586, the parties reached a confidential settlement in December. Philip Culhane, a partner at Simpson Thacher & Bartlett, was among the plaintiffs (NYLJ, Aug. 30, 2012 & Dec. 28, 2012).

The current suit's claims include a violation of the state's Judiciary Law §487, which prohibits attorney misconduct toward a court that includes "deceit or collusion, with intent to deceive the court or any party."

It was brought by 11 of the 12 plaintiffs, except for Culhane, and especially targets the firm's defense of the school with a focus on Kohn and the firm's description of an internal probe the school conducted in 2002."
 

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When the Attorney-Client Relationship Ends

We're pleased to announce an article in the New York Law Journal, entitled When the "Attorney-Client Relationship Ends" appears today in the Outside Counsel column. Here is an excerpt from the article:

"As do all things in life, an attorney-client relationship, once commenced must someday end. It may end at the settlement or verdict of a litigation, it may end at the completion of a transaction, or it may end in the middle. How the attorney-client representation ends has significant effect on fees, compensation and potential legal malpractice liability. Litigations comprise a large portion of attorney-client interactions, and present a sharper beginning and end than do transactions. Transactions might include real estate leases and sales, business negotiations, employment negotiations or contract. Nevertheless, at some time all of these events will be over.

For the most part, it's not the end of a relationship that results in tension, negotiation or litigation, it's attorney fees. Depending on the format of those fees, whether hourly, contingent, flat or a hybrid, the end of the attorney-client relationship often indicates or triggers a dispute over fees. Disputes over fees consistently occupy a large amount of attorney time and are governed by some well-understood principles.

We will examine discharge of the attorney by the client first. Later we'll look at attorneys who wish to end the relationship and must do so with permission of the court. Discharge of an attorney by a client is binary. It is either for cause or not for cause.

 

Read more: http://www.newyorklawjournal.com/PubArticleNY.jsp?id=1202615356079&When_the_AttorneyClient_Relationship_Ends#ixzz2bw7UY46Z

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Late and the Wrong Kind of Damages

When does the statute of limitations begin to run?  It might be on the day of the mistake, and it might be later.  The "later cases" are rare, and  few in number.  Anderson v Beranbaum 2013 NY Slip Op 31821(U) August 5, 2013 Sup Ct, New York County Docket Number: 151918/2013
Judge: Anil C. Singh is not one of them, yet it quotes an elusive and interesting case in which the statute did not begin to run from the date of the mistake. 

"Under CPLR 214(6), all claims for legal malpractice, no matter whether they sound in tort or contract, have a three year statute of limitations. Case law further provides that the statute of limitations begins to toll upon the date that all elements of a legal malpractice have been fulfilled such that the injured party could have brought suit, regardless of whether the injured party was aware of the injury at the time (IDT Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d
132, 140 (2009))."

As for plaintiff's claims that confidentiality was breached and she was "devastated?"  These are non-economic claims and cannot be compensated in legal malpractice.  "The second incident of legal malpractice is based on Beranbaum's alleged breach of confidentiality, which the plaintiff claims "devastated" her. Here, the plaintiff has failed to state a claim upon which relief may be granted. The only injuries that Anderson alleges from the legal malpractice are emotional, which are not considered compensable for legal malpractice claims (see Dombrowski v. Bulson, 19 N.Y.3d 347, 351 (2012); Wolkstein v. Morgenstern 275 AD.2d 635, 637 (1st Dept 2000); Dirito v. Stanley, 203 A.I>.2d 903 (4th Dept 1994))."

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When Does the Statute of Limitations Start to Run?

Its not always easy to say when the last date upon which an attorney renders service to a client, nor when the statute of limitations commences. . is it on the day that a defective security agreement is prepared? is it on the day that the security agreement is given to debtor? In this case, its no earlier than the day when the last signature is executed.

Americana Capital Corp. v Nardella 2012 NY Slip Op 04927, Appellate Division, First Department determines the date upon which a malpractice claim arose.
 

"Plaintiff's legal malpractice claim was not barred by the statute of limitations (see CPLR 214[6]). Plaintiff alleges that the deceased negligently drafted a security agreement preventing plaintiff, as the creditor, from being able to enforce the agreement as against the debtor once the debtor defaulted.

Plaintiff's legal malpractice claim accrued no earlier than when the agreement was executed, which occurred on November 29,
2002, the date of the last signature on the agreement (see McCoy v Feinman, 99 NY2d 295 [2002]), and this action was commenced less than three years later. "
 

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Avoiding Malpractice with Checklists

An interesting article in today's New York Law Journal discusses the effects of checklists. Brook Boyd writes: "Lawyers can dramatically improve the quality, efficiency, and speed of their work by using "smart" checklists that are digitally integrated with their forms, and that reflect the complexity of their practices. But there are also other very important reasons to use these "smart" checklists and integrated forms."

He discusses the use of checklists in piloting.  Even in the least sophisticated single engine Cessna there are at least 5 checklists, covering normal operation, take off, landing, weight and balance requirements and emergencies.  As he discusses, these checklists save lives.  In lawyering, they save mistakes.

"Checklists Protect Lawyers Against Impaired Judgment Caused by Stress. But there is a practical problem. It takes time to make a good checklist, and clients will not pay for developing an internal law firm form that is intended for general use. So we take five minutes, and just copy a similar form from another deal that closed last week. Why invest any time in developing detailed checklists for any matter when we have extensive experience in similar matters, and every minute billed to preparing a detailed checklist, or reading it, increases the cost to the client?

Lawyers also have a much bigger problem, which we are not even consciously aware of. We are instinctively overconfident.26 We think we know more than we do, and we minimize the risk of error.27

Worse, we are especially likely to make errors when we are under time pressure, multitasking,28 anxious about impressing important clients,29 or otherwise stressed—in other words, a typical day for a lawyer. In these stressful situations, we also lose some self-control, react aggressively to provocations,30 are more gullible,31 and make poor judgments, just as we do when we have had a few drinks or too little sleep.32 We are also much more likely to see these deficiencies in others than ourselves.33

Nobel Laureate Daniel Kahneman illustrated the dangers of multitasking when he described a famous experiment based on a "short film of two teams passing basketballs. The viewers of the film are instructed to count the number of passes made by one team…. Halfway through the video, a woman wearing a gorilla suit appears, crosses the court, thumps her chest, and moves on. The gorilla is in view for 9 seconds. Many thousands of people have seen the video, and about half of them do not notice anything unusual. It is the counting task—and especially the instruction to ignore one of the teams—that causes the blindness. No one who watches the video without that task would miss the gorilla…. [W]e can be blind to the obvious, and we are also blind to our blindness."

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Protecting the Record in Legal Malpractice

Barely submerged below the decisions of trial and appellate courts is the fear that if legal malpractice litigation is given full rein, there will be a legal malpractice case which immediately follows every trial of any nature. After all, the one thing that legal malpractice always has are claims of attorney misrepresentation, and every trial has one or more attorneys. So, in Kleinser v Astarita 2012 NY Slip Op 01130 ; Appellate Division, First Department we see such a situation. Plaintiff sues and loses a case, and then sues and loses a legal malpractice.
 

"We need not decide the statute of limitations issue, because even if timely commenced, plaintiff failed to raise an issue of fact as to his claims of legal malpractice and breach of contract. Plaintiff's contention that defendants did not place before the trial court in the underlying action the evidence of his ownership interest in the "47BH Account" is unsupported in the record. The trial court in the underlying action expressly found that plaintiff had a 1/3 interest in the 47BH Account. Moreover, the court explained, in detail, that that 1/3 interest entitled plaintiff to recover only $37,108, not the much greater sums he sought. Plaintiff does not argue that the court's calculation of damages was erroneous or a result of defendants' negligence. Hence, he failed to show that any negligence on defendants' part proximately caused him to recover less than he was otherwise entitled to (see Brooks v Lewin, 21 AD3d 731, 734 [2005], lv denied 6 NY3d 713 [2006]). To the extent plaintiff argues that defendants did not sufficiently emphasize his ownership in the 47BH account, the argument is unavailing, since an insufficient emphasis would be, "at most, a mere error in professional judgment not rising to the level of legal malpractice" (see Geller v Harris, 258 AD2d 421, 421 [1999]; Rubinberg v Walker, 252 AD2d 466, 467 [1998]).
As to his breach of contract claims, plaintiff failed to present evidence establishing the term of his alleged oral agreement with defendant Martin Kaplan whereby Kaplan agreed that defendant Gusrae Kaplan & Bruno would prosecute all appeals from the underlying judgment for no more than $50,000. "

 

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Going Way Way Way Too Far

Attorney retainer agreements often seem to be contracts of adhesion...a term we rarely see post-law school.  Client comes to attorney at many disadvantages.  Client is in trouble, is coming to a "wise man" seeking help, knows that client needs to pay, and is subject to a serious disparity between their bargaining positions.  Nevertheless, the vast majority of attorney-client relationships work out just fine.  This one didn't.  The New York Law Journal's Christine Simmons reports  that Justice Jeffrey Spinner in Suffolk County has dismissed a fee claim by Bryan L. Salamone & Associates:  ""Counsel has the insufferable temerity to actually admonish this Court for expressing its distress over the terms and conditions of Plaintiff's over-reaching retainer agreement (clearly a contract of adhesion on its face), baldly stated that all of the terms thereof '…are all within the ambit of the law,'" Spinner said in response. "

The Salamone firm brought a collection suit in July 2012 against Melissa Cohen for $52,701: $10,540 in collection suit fees and $42,161 in fees and interest in an underlying divorce "at the rate of 18 (percent)" from February 2012.

 

"Spinner cited a 1985 case, Eikenberry v. Adirondack Spring Water, 65 NY2d 125, which found an agreement to pay attorney fees was subject to General Obligations Law §5-501 and its interest rate ceiling of 6 percent per year.

Since the Salamone agreement provided for interest at a rate of more than 6 percent a year, "the said agreement is found by this Court to be usurious," Spinner said in the May ruling.

He found the agreement unenforceable, reversed summary judgment in favor of Cohen and dismissed the law firm's complaint with prejudice." "But in his ruling Thursday, Spinner said he again reviewed the firm's billing and found it to be "facially outrageous and certainly bereft of reasonableness" while Cohen's assertions are "factually at odds" with Salamone's claims.

The judge also said the firm's court papers used "an unpleasant, somewhat sarcastic and clearly condescending tone throughout, which, counsel is warned, borders upon conduct that may well be sanctionable."

Spinner said Wan scolded the court for failing to provide statutory and common law bases for certain findings, "even though the character of and deficiencies within the retainer were so painfully obvious on their face." "

 

 

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The Court of Appeals Decides a Legal Malpractice Case, and yet...

In Dombrowski v Bulson   2012 NY Slip Op 04203 [19 NY3d 347]   May 31, 2012   Lippman, Ch. J.
Court of Appeals decided that incarceration - loss of liberty was not an economic damage, and was "non-pecuniary."  It wrote: "We see no compelling reason to depart from the established rule limiting recovery [*4]in legal malpractice actions to pecuniary damages. Allowing this type of recovery would have, at best, negative and, at worst, devastating consequences for the criminal justice system. Most significantly, such a ruling could have a chilling effect on the willingness of the already strapped defense bar to represent indigent accused. Further, it would put attorneys in the position of having an incentive not to participate in post-conviction efforts to overturn wrongful convictions. We therefore hold that plaintiff does not have a viable claim for damages and the complaint should be dismissed in its entirety. "

One might think that the Court of Appeals' clear statement would hold true in all cases, but there are many slips "between the cup and the lip."   In D'Alessandro v Carro  2013 NY Slip Op 51275(U)  Decided on July 25, 2013  Supreme Court, New York County Hagler, J., a motion to dismiss on this basis goes awry.
 

Plaintiff sued for legal malpractice claiming that his appellate counsel negligently failed to raise a speedy trial issue, resulting in many years of incarceration.  When defendants moved to dismiss, Supreme Court denied the motion citing the AD decision in Dombrowsky, soon to be reversed by the Court of Appeals.  A notice of appeal was filed, and after the Court of Appeals decision, the appeal was not pursued.

Now, on a new motion to Supreme Court, defendants find that they cannot get the case dismissed. "While defendants are correct that every trial court has the inherent discretion to change its own decisions, that is only true prior to an appellate determination on the merits of the case. In other words, this Court no longer can grant renewal of the Prior Order due to the subsequent order of the Appellate Division which operated as a dismissal of the appeal on the merits. However, the Appellate Division is not so constrained to review its own dismissal of the Prior Order for lack of prosecution.

Moreover, defendants have not provided any reason for their failure to forestall the dismissal of the appeal and the Court's exercise of its discretion. Defendants had many options to avoid this result such as: (1) timely perfecting the appeal, (2) seeking an extension to perfect the appeal, or (3) simply withdrawing the appeal. Instead, the Appellate Division was required to issue an order dismissing the abandoned appeal for want of prosecution.

Under these circumstances, this Court does not have the discretion to grant defendants' motion for renewal after the Appellate Division has dismissed the appeal of the Prior Order for lack of prosecution, which operated as a dismissal on the merits. "


 

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Effectively Compelled Settlements in Legal Malpractice

Client settles case and then turn around and sues attorney who settled the case for client, or worse (for the attorney) client settles case on his own, and then sues attorney who was already off the case. Can a client sue for legal malpractice after settling the case? The answer is yes, if the settlement was effectively compelled by the attorney's malpractice.

Put in a more elegant way, the Appellate Term decided Garg v Wigler 2012 NY Slip Op 50494(U)
Appellate Term, First Department:

"Accepting plaintiff's allegations as true, and according them the benefit of every favorable inference, as we must in the context of a motion to dismiss on the pleadings (see Leon v Martinez, 84 NY2d 83, 87-88 [1994]), we find the complaint, as amplified by plaintiff's verified answers to defendant's interrogatories, sufficient to state a cause of action for legal malpractice. The record so far developed raises triable issues as to whether defendant-attorney's prior representation of plaintiff — including defendant's acknowledged failure to timely file an administrative appeal following the denial of plaintiff's claim for disability benefits — was so deficient as to compel plaintiff to settle the underlying federal lawsuit (see Jones Lang Wootten USA v LeBoeuf, Lamb, Green & MacRae, 243 AD2d 168, 175 [1998], lv dismissed 92 NY2d 962 [1998]; Whitman & Ransom v Revson, 220 AD2d 321 [1995]). "Settlement, when compelled by an attorney's breach of the standard of care, does not present an intervening cause so as to bar a malpractice action" (Jones Lang Wooton USA, at 175). We find unavailing defendant's contention that there are no issues of fact as to whether its malpractice, if any, caused plaintiff damages. "

 

 

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A Practice Guide: What is Sufficient Notice for a Summons With Notice

Here is the tension:  in order to toll the statute of limitations one must commence an action.  Sometimes there is not enough time to prepare a competent complaint and file it,.  The solution is a summons with notice.  The notice requirement is what separates a good summons (which may lead to a default judgment) from a bad one.  What is enough "notice"?

Smith v Subbaiah  2013 NY Slip Op 31657(U)  July 18, 2013  Supreme Court, New York County
Docket Number: 805332/2012  Judge: Martin Shulman  discusses this issue.

"Defendants argue the summons with notice is jurisdictionally defective because it lacks any supporting facts, such as the date and type of treatment plaintiff received, thus giving no indication of plaintiff's allegations plaintiff against them. Defendant Subbaiah further alleges that he has treated at least two (2) patients having the common name of Carol Smith and, due to that fact, plaintiffs failure to include more detailed allegations in the summons with notice was particularly insufficient to place him on notice of plaintiffs claims."

"CPLR 305 (b) provides in relevant part:
Summons and notice. If the complaint is not served with the summons,
the summons shall contain or have attached thereto a notice stating the
nature of the action and the relief sought ...


The absence of such notice or a defective or inadequate description of the nature of the action which fails to apprise the defendant of the essence of the claim is fatal because it fails to confer jurisdiction over the defendant and must be treated as a nullity. Scaringi v Broome Realty Corp., 154 Misc2d 786, 789,586 NYS2d 472 (Sup Ct, NYCounty 1991), affd 191 AD2d 223 (1 sl Dept 1993). 

Defendants' motions are denied. "The purpose of the CPLR 305 (b) notice is to provide the defendant with 'at least basic information concerning the nature of [the] plaintiffs claim and the relief sought'''. Bullis v American Motors Corp., 175 AD2d 535, 536 (3d Dept 1991), citing Parker v Mack, 61 NY2d 114, 117 (1984). "A liberal construction of the statutory requirement of the contents of the notice accompanying a summons served without a complaint is consistent with the general policy of the CPLR". Id. A plaintiff is not required to specifically state her theory of recovery since "absolute precision is not necessary". Id. Here, although plaintiffs characterization of her claim is broad and she offers no specific factual details, this court cannot say that her summons with notice is inadequate at this stage of the litigation. Medical malpractice is the essence of plaintiffs claim and a recognizable cause of action. Scaringi, 191 AD2d at 223. As the lower court noted in Scaringi (154 Misc2d at 789), broadly descriptive words such as "automobile negligence", "negligence", "libel" and "legal services" have been held sufficient to describe an action's nature. Indeed, in Pilla v La Flor De Mayo Express, Inc., 191 AD2d 224,224 (1 st Dept 1993), the First Department held that CPLR 305 (b)'s requirements were met by the mere statement "personal injury" (compare Roth v State Univ. of New York, 61 AD3d 476 [1 st Dept], Iv den 13 NY3d 711 [2009] [no compliance with CPLR 305 (b) where summons described the action's nature a's "violations of federal, New York State, and New York City human rights laws, including but not limited to" various named statutes, since numerous potential causes of action could be brought under such statutes])."
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Consolidation or Joint Trial of a Multi-Party Legal Malpractice Case

A crane topples at East 51st Street, and wrecks the development of a big building.  In the fallout, three legal malpractice law suits ensue, with many big-name attorneys suing or being sued.  How do the cases all fit together for trial?

Arbor Realty Funding, LLC v Herrick, Feinstein LLP  2013 NY Slip Op 51210(U)   Decided on July 24, 2013  Supreme Court, New York County  by Justice Edmead  lays out the principals and holds for complete consolidation.

"In support of consolidation, Herrick (and Gourlay) argue that all three actions should be consolidated as they all share common questions of law and fact arising from malpractice relating to the same zoning issues at the same Project.[FN6] Like Arbor, the Developer alleges that because of the defendants' participation in the zoning issues, the Developer was ultimately unable to obtain construction financing, and therefore, defaulted on its loans to Arbor. The crane collapse, Mitzner's opinions (from the outset and subsequent to the crane collapse), and the economic downturn which affected the New York real estate market overlap in all three cases, such that a finding of negligence against any of the defendants would affect the causation analysis with respect to Arbor's losses. There is also a substantial overlap of the parties, witnesses and evidence.

In addition, consolidation would promote judicial economy by avoiding multiple depositions of the same witnesses on the same issues. It would also save unnecessary costs and prevent delay. Since no depositions have taken place in any of the three cases, consolidation would allow the witnesses, parties and non-party subpoena recipients to be heard once.

Furthermore, consolidation is necessary to prevent any injustice that would result from [*5]divergent decisions, as the court would be forced to analyze the zoning issues, weigh the reasonableness of the professional zoning advice in light of the surrounding circumstances and determine the causation issues in each of the three actions, based on the same set of facts. "

"Pursuant to CPLR § 602(a), when actions involving a common question of law or fact are pending before a court, the court "may order a joint trial of any or all the matters in issue, may order the actions consolidated, and may make such other orders concerning proceedings therein as may tend to avoid unnecessary costs or delay" (CPLR 602 [a]). While it is not necessary that all rules and all facts be common to both actions, "[t]here must at least be some important rules of law and some substantial issues of fact to be determined that are in common to both actions" (Siegel v Greenberg, 85 AD2d 516, 444 NYS2d 622 [1st Dept 1981], citing Gibbons v Groat, 22 AD2d 996, 254 NYS2d 843 [3d Dept 1964]). Indeed, consolidation is mandated by judicial economy where two lawsuits are intertwined with common questions of law and fact (Teitelbaum [*8]v PTR Co., 6 AD3d 254, 774 NYS2d 699 [1st Dept 2004] (consolidation warranted where both actions arose out of the same partnership agreement, the parties to each possess knowledge and information relevant to the claim in the other, and the lists of potential witnesses in the two cases are almost identical) (emphasis added)).

Further, consolidation is generally favored by the courts "in the interest of judicial economy and ease of decision making where there are common questions of law and fact, unless the party opposing the motion demonstrates that consolidation will prejudice a substantial right" (Amcan Holdings, Inc. v Torys LP, 32 AD3d 337, 340 [1st Dept 2006], citing Amtorg Trading Corp. v Broadway & 56th St. Assoc., 191 AD2d 212, 213 [1st Dept 1993]). The burden of demonstrating prejudice to a substantial right is on the party opposing consolidation (Progressive Ins. Co. v Vasquez, 10 AD3d 518, 519 [1st Dept 2004]; Geneva Temps Inc. v New World Communities, Inc., 24 AD3d 332, 334 [1st Dept 2005]).

At the outset, it cannot be disputed that Arbor's actions against Herrick and Gourlay Actions share the same plaintiff (Arbor), and are premised upon the same (allegedly mistaken) Gourlay Opinion which served as a critical basis for Arbor's loan to East 51st Street, whose default allegedly caused Arbor significant monetary damages. Notably, no party offered any meaningful opposition to the consolidation of these two actions. Therefore, these two actions (the "Arbor actions") are consolidated for all purposes."
 

"Further, common questions of fact exist concerning the accuracy of the same zoning opinion allegedly rendered and/or endorsed by each of the defendants, i.e., that the "tower" could [*9]be built, as proposed, on the lots in question. This zoning opinion, allegedly endorsed by Cozen/Blank Rome (via Mitzner) in East 51st Street's action, and by Herrick/Gourlay in Arbor's actions, which caused East 51st Street to borrow, and Arbor to lend, funds to finance the Project is a critical, material fact shared in all actions. Mitzner's legal advice in forming the opinion, with Gourley, that the "tower" could be built, as proposed, on the lots in question, is the common thread woven in the fabric of each action.

Critically, Arbor's cases against Herrick and Gourlay stemming from the advice Herrick gave during the limited time period of the loan process, are not materially different from East 51st Street's case against Cozen/Blank Rome, which involves advice Cozen/Blank Rome gave to build a project that "evolve[d] overtime." (Transcript, p.36). The advice given by Mitzner (of Cozen/Blank Rome) to East 51st Street at the outset of the Project and before the loan was pursued, later resurfaced when Mitzner allegedly consulted with Herrick to obtain the certification from Gourlay during the loan process. Contrary to Arbor's contention, the issue of "did you [Herrick] give proper zoning advice or not" or "should you [Herrick] have told me that the advice you were giving me was aggressive" (Transcript, p. 36) is intertwined, and interdependent on whether the opinion given, i.e., the Gourley Opinion (allegedly created with the assistance of Mitzner of Cozen/Blank Rome), was proper, which is the very issue in the Developer's case. As shown by the parties' efforts at consolidated document and deposition discovery, there is a significant overlap of witnesses and documents common to each action.

And, although the parties on the plaintiffs' side, and the parties on the defendants' side, are different, it has been stated if "it is otherwise proper, a consolidation will not be denied because the parties involved are not identical" (MCC Funding LLC v Diamond Point Enterprises, LLC, 36 Misc 3d 1206(A), 954 NYS2d 760 (Table) [Sup. Ct., Kings County 2012] citing Philip Shlansky & Bro., Inc. v Grossman, 273 AD 544, 546 [1st Dept 1948]). Further, while it cannot be disputed that the plaintiff in the Developer Action was the "borrower," and the plaintiff in the Arbor actions was the "lender," each of which served different purposes with respect to the Project, each had the same interest in the legitimacy of the Opinion that "tower" could be built as planned and represented by Mitzner. Due to the interdependency and relationship of the different defendants (and Mitzner), whose alleged acts and omissions affected the coordination and financing of the Project, and who allegedly coordinated their opinions to complete the Project, consolidation is warranted, notwithstanding that the plaintiffs are the lender and borrower of this Project. "

 

 

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Charging Liens,Retaining Liens and Child Support

What happens when two deserving parties vie over the same zero-sum pot of money?  In this case it is a hard-working attorney with a charging lien and the children in a child-support proceeding upstate.  In Piccarreto v Mura   2013 NY Slip Op 23241   Decided on July 3, 2013   Supreme Court, Monroe County, Judge Dollinger writes a thoroughly researched and well-reasoned discussion of whether the children are better off with attorneys getting paid for collections or with attorneys getting stiffed.
 

"The facts are undisputed. A default divorce occurred in 1993, the husband was ordered to pay child support, and the court in 1993 awarded a judgment for $25,226.72 in unpaid child support. Thereafter, in a series of events described in a prior opinion of this court, the parties engaged in repeated court appearances in the mid-1990s. When the dust settled, the original judgment of divorce remained in full force and effect. In 2012, the wife moved, originally in family court, to recover all the accumulated child support, which with accumulated interest, totaled $549,403.62 as of September 2011."

"There has been no determination what amount of the house sale proceeds are necessary to pay any child support arrears owed by the husband. This court has not heard proof on any claimed offsets against the child support obligation. Furthermore, this court is struck by the current legal position of the wife, who, after delaying 16 years, now seeks to recover child support. The children, who were the intended beneficiaries of the support, are either emancipated or nearly emancipated. In affidavits submitted earlier, the wife suggests she made applications for welfare and food stamps while living at her mother's house at the time of the divorce in the mid-1990s, but there is no evidence before this court that the wife had incurred any financial consequences as a result of the husband's failure to pay child support for 16 years. There is no evidence that the children suffered any deprivation because of the husband's failure to pay child support. Against this background and during the midst of serious settlement negotiations, wife's counsel moved to withdraw, citing friction with his client and her failure to communicate with him. The attorney also sought judgment for fees in the amount $30,545.91, and a charging lien under Section 475 of the Judiciary Law against the house proceeds set aside by the court under its earlier order.

In advance of the return date of the husband's motion, the wife retained new counsel, who cross-moved to dismiss the attorney's claim for a charging lien, and sought disgorgement of the sums advanced to both the wife's former counsel, and husband's counsel. Wife's new counsel argued that those sums were erroneously paid from the "wife's child support." Wife's new counsel claims that the prior counsel cannot have a charging lien against child support, and cannot, under any circumstances, be paid attorney fees from the wife's child support. He argues that the former attorney did not create any "new funds" on which the charging lien under Section 475 of the Judiciary Law could attach because the entire amount owed to the wife was child support and no liens are permitted against child support. Wife's counsel also disputes the former attorney's [*3]compliance with several portions of the New York rules of court. "

"Several New York courts have held that an charging lien does not attach to maintenance or alimony. Theroux v. Theorux, 145 AD2d 625 (2nd Dept. 1988). The line of authority regarding liens against maintenance goes back nearly a century to the New York Court of Appeals decision in Turner v. Woolworth, 221 NY 425, 430 (1917): "equity, confining the fund [for alimony] to the purposes of its creation, declines to charge it with liens which would absorb and consume it." See also Indell v. Tabor, 185 NY 873, 874-75 (1920) (attorney not entitled to reach client's alimony to satisfy his judgment for attorney fees). On the question of the charging lien asserted against child support, there is less judicial authority from New York's appeals courts. The Appellate Division, Fourth Department suggested that no retaining lien could be asserted against child support arrears. Schelter v. Schelter, 206 AD2d 865, 614 NYS2d 853, 854 (1994) ("if the funds were treated as payments for child support, we would conclude that such payments are not subject to an attorney's retaining lien").[FN2] While Schelter v. Schelter involved a retaining lien, nonetheless it provides some [*5]indication that attorneys' liens cannot be enforced against arrears in child support. But the Fourth Department's omission in Schelter v. Schelter to cite any then-existing New York authority, the acknowledged difference between the common law retaining lien and the broad reach of the statutorily-mandated charging lien in New York leaves the question still somewhat undefined."

Read on in the case for Judge Dollinger's discussion of California and other states' law on this issue and how he comes to a compromise.

 

 

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Must Plaintiff Exhaust all Appeals before a Legal Malpractice Case?

Up until now, we had always thought the question was answered and no was no longer in doubt.  One need not exhaust all appeals before starting a legal malpractice case.  In Grace v Law  
2013 NY Slip Op 05383  Released on July 19, 2013 Appellate Division, Fourth Department  we were surprised to see the 4th department call this a novel point of law.  The answer is still no.
 

"Initially, we reject defendants' contention that plaintiff waived or abandoned his legal malpractice claim by voluntarily discontinuing what remained of his medical malpractice action and failing to take an appeal from District Court's November 2010 order dismissing the bulk of his claims. In support of that contention, defendants primarily rely upon this Court's decision in Rupert v Gates & Adams, P.C. (83 AD3d 1393, 1396), in which we concluded that the plaintiff waived his right to raise certain allegations of legal malpractice in the context of a matrimonial action based upon his execution of a settlement agreement. Specifically, we concluded that, although certain allegations of legal malpractice had merit, Supreme Court in that case "did not err in granting defendants' motion concerning those alleged errors because they could have been corrected on an appeal from the final judgment in the matrimonial action, and plaintiff consented to the dismissal on the merits of any appeal in the matrimonial action as part of the global settlement resolving a bankruptcy proceeding in which he was involved. In so doing, plaintiff precluded pursuit of the very means by which defendants' representation of plaintiff in the matrimonial action could have been vindicated . . . We therefore conclude that plaintiff, by virtue of his global settlement, waived the right to raise those shortcomings in this legal malpractice action" (id. [emphasis added]). "

"Although the precise question presented herein appears to be an issue of first impression in New York, we note that several of our sister states have rejected the per se rule advanced by defendants herein (see e.g. MB Indus., LLC v CNA Ins. Co., 74 So 3d 1173, 1176; Hewitt v Allen, 118 Nev 216, 217-218, 43 P3d 345, 345-346; Eastman v Flor-Ohio, Ltd., 744 So 2d 499, 502-504; Segall v Segall, 632 So 2d 76, 78). As has been noted, such a rule would force parties to prosecute potentially meritless appeals to their judicial conclusion in order to preserve their right to commence a malpractice action, thereby increasing the costs of litigation and overburdening the court system (see Eastman, 744 So 2d at 504). The additional time spent to pursue an unlikely appellate remedy could also result in expiration of the statute of limitations on the legal malpractice claim (see MB Indus., 74 So 3d at 1181). Further, requiring parties to exhaust the appellate process prior to commencing a legal malpractice action would discourage settlements and potentially conflict with an injured party's duty to mitigate damages (see Crestwood Cove Apts. Bus. Trust v Turner, 164 P3d 1247, 1254; Eastman, 744 So 2d at 504). "

 

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When Does A Trial Court Act Like an Appellate Court

Sometimes, Supreme Court of the State of New York acts like an appellate court in legal malpractice cases.  In Pasquale v Heppt 2013 NY Slip Op 31560(U) July 15, 2013
Supreme Court, New York County Docket Number: 112890/2011 Judge: Doris Ling-Cohan we see one such example.  Note that plaintiff argues that a decision of Queens County shows that the attorney committed legal malpractice, and Judge Ling-Cohan comes to the completely opposite conclusion, acting, in essence as an appellate court.

"This action arises out of the defendant’s legal representation of plaintiff Lillian De Pasquale (Lillian) in an underlying action involving the disputed estate of her late husband, Joseph De Pasquale (Joseph), as well as the legal representation of plaintiff Vincent De Pasquale (Vincent), son of Lillian, for employment and contract claims in a separate matter.

Lillian was the executrix of Joseph’s estate. In 2005, Daniel De Pasquale (Daniel), brother of Joseph, commenced an action against Lillian in Supreme Court, Queens County (the Estate Action). In March 2009, Lillian agreed to settle the Estate Action with Daniel, and the settlement was entered into on the record before the court. In April 2009, Lillian and Vincent engaged the legal services of defendant, and allegedly paid him a retainer of $5,000 each, for a total of $10,000. Lillian allegedly retained defendant, a f t e r a settlement was reached in the Estate Action, which was entered on the record, to complete the settlement of the Estate Action, while Vincent allegedly
retained defendant to research and litigate claims relating to employment and contractual issues in a separate matter.

After judgment was entered, the Honorable Orin R Kitzes,Justice of the Supreme Court, Queens County, denied Lillian's order to show cause to vacate the settlement, and stated in his decision that the proper procedure was to bring a plenary action. Lillian alleges that she had to pay post-judgment statutory interest on the judgment, as well as statutory poundage to the Marshal, as a result of defendant's act of filing an order to show cause, rather than filing a plenary action. Lillian alleges claims of legal malpractice and breach of contract.

In regard to Lillian's claim for legal malpractice,the documentary evidence presented by defendant establishes that filing an order to show cause instead of a plenary action was not the proximate cause of Lillian's damages. Regardless of whether defendant filed a plenary action or not, the settlement payment was due June 8, 2009. After payment was not made on that date, as stated by Justice Kitzes, the plaintiff in the Estate Action engaged the services of the Marshal after taking "various actions to compel [Lillian] to appear for depositions to determine her assets and for those assets to not be dissipated'' (Furman affirmation in support of motion to dismiss, exhibit E). Thus,
it was not the filing of an order to show cause versus a plenary action, which caused the poundage owed to the Marshal, rather, it was Lillian's failure to timely pay the settlement amount, and
the actions of Lillian afterwards, which caused the poundage and interest to accrue. It is noted that"[s]tipulations of settlement are favored by the courts and not lightly cast
aside ... This is all the more so in the case of 'open court' stipulations ... within CPLR 2104, where strict enforcement not only serves the interest of efficient dispute resolution but also is essential to the management of court calendars and integrity of the litigation process.  Only where there is a cause sufficient to invalidate a contract, such as fraud, collusion, mistake or accident, will a party be relieved from the consequences of a stipulation made during litigation.. .". Hallock v. State of New York, 64 NY2d 224, 230 (1984) (citations omitted). Thus, Lillian's claim for legal malpractice is dismissed."
Only where there is cause sufficient

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Legal Malpractice and the Blind Eye

Violation of a disciplinary rule alone is insufficient to uphold a legal malpractice cause of action.  We see, in Schlam Stone & Dolan, LLP v Poch   2013 NY Slip Op 51176(U)   Decided on July 9, 2013   Supreme Court, New York County   Hagler, J. how a cause of action for legal malpractice founders on the inability to link the violation with ascertainable damages. 
 

"Arfa and Shpigel were members of various entities that owned and managed various properties in the Bronx, New York. They were the sole members and owners of Ocelot Capital Management LLC ("OCM"). (Exhibit "A" attached to the Affidavit of Howard R. Poch, sworn to on December 23, 2011, in Opposition to the Motion ["Poch Aff."].) OCM partnered with Eldan-Tech Inc. ("Eldan") to form Ocelot Portfolio Holdings LLC ("Ocelot Portfolio") to pursue real estate ventures. Eldan retained an eighty percent interest and OCM had a twenty percent interest in Ocelot Portfolio. However, OCM was the managing member of Ocelot Portfolio. (Id.) Ocelot Portfolio was sole member and owner of entities known as OCG I, LLC, ("OCG I") and OCG V, LLC ("OCG V"). OCG I owned 1268 Stratford Avenue, Bronx, New York, and OCG V owned 1524 Leland Avenue, Bronx, New York. (Exhibit "B" attached to the Poch Aff.) Ocelot Properties Management, Inc. ("OPM"), was the entity that managed the properties for OCG I and OCG V. Ocelot Capital Group, LLC ("OCG") owned OPM, which was controlled solely by Arfa and Shpigel. (Exhibit "C" attached to the Poch Aff.) "

"In late 2007, Shafir had discussions with Poch to retain him as OCM's landlord-tenant counsel. (Exhibit "E" attached to the Poch Aff.) The negotiations continued in the beginning of 2008, when the parties finally agreed via e-mail to Poch's retention at $5,500 per month to handle all of OCM's landlord-tenant disputes. (Exhibit "G" attached to the Poch Aff.) However, no formal written retainer agreement was executed by the parties.

Poch then took over the old inventory of cases and started new ones. The custom and practice between the parties was that Poch communicated with Mendez and Aryeh on these cases. (Exhibits "H," "I," and "M" attached to the Poch Aff.) As part of his duties, Poch defended the various OCG entities in proceedings in Housing Court that the Department of Housing and Preservation and Development of the City of New York ("HPD") brought against them to repair certain violations in various buildings ("HP Proceedings"). Poch settled these HP Proceedings with consent orders requiring payment to HPD of civil penalties and fines by a date certain which would increase ten-fold if not timely paid. Poch advised Mendez and Aryeh of at least four defaults in payment and resulting increased penalties. (Exhibits "O" and "P" attached to the Poch Aff.) "

 

"In this case, plaintiffs mainly rely on the uncontroverted fact that Poch never communicated directly with Arfa and Shpigel before executing the Consent Orders in the HP Proceedings. In support thereof, plaintiffs offer the expert opinion of Bruce Green, Esq. ("Green"), who opines that Poch's failure to communicate directly with Arfa and Shpigel violated the former Disciplinary Rule 6-101, which consequently resulted in a breach of his duty or negligence. Plaintiffs conclude that Poch's failure to communicate itself constitutes legal malpractice. While Poch's failure to communicate directly with Arfa and Shpigel may have been unwise in hindsight, or said conduct may have even been violative of a disciplinary rule, that alone is insufficient to give rise to an actionable cause of action. (Schwartz v Olshan Grundman Frome & Rosenzweig, 302 AD2d 193 [1st Dept 2003].)

Indirect communication may have been acceptable under these circumstances as defendants allege that there was a prior custom and practice wherein Arfa and Shpigel specifically delegated all communications with Poch to their designated agents, Shafir and Aryeh. It is noteworthy that Arfa and Shpigel's designated agents forwarded the petitions, which included them as individual respondents, to Poch to seemingly defend the respondents in the HP Proceedings. It is common and customary in landlord-tenant practice, for the same attorney (i.e., Poch), to represent both the corporate respondents (e.g., OCG I and OCG V), and related individual respondents such as corporate officers or agents acting in their official duties (i.e., Arfa and Shpigel), in HP Proceedings. (Affidavit of Greg Calabro, Esq., dated December 23, 2011 ["Calabro Aff."] at ¶ 6). (See, also, Cooke v Laidlaw Adams & Peck, Inc., 126 AD2d 453 [1st Dept 1987].) At the very least, Arfa and [*5]Shpigel "ratified the authority of Poch to enter into the consent order[s] by receiving the benefit of its terms and failing to raise any objection for more than one year from the date of the order[s]." (Orders of the Appellate Term, First Department decided April 21, 2011, 2011 NY Slip Op 50707[U] and 2011 NY Slip Op 50708[U], attached as Exhibit "O" to the Hitchcock Aff.) As such, Poch may have been permitted to communicate through intermediaries rather than in a direct manner. "

"Plaintiffs also have failed to demonstrate the second element of proximate cause. They have failed to demonstrate by expert or any other testimony that "but for" the defendants' alleged negligence Arfa and Shpigel would have obtained a favorable result or not sustained damages. On this limited record, it appears that entry of judgments against Arfa and Shpigel occurred as a result of OCG I and OCG V's failure to correct hundreds of violations and pay negotiated civil penalties as promised in the Consent Orders. HPD obtained personal liability against Arfa and Shpigel for failure to correct housing violations because the term "owner" is broadly construed as any person who is directly or indirectly control of the subject building as defined in Multiple Dwelling Law § 4(44) and the Housing Maintenance Code Section 27-2004(45). Therefore, personal liability may attach to a corporate officer who is construed to be an agent irrespective if the officer is or is not involved with the operation of the subject building. This is a strong motivating factor to quickly correct violations or the officers may be exposed to personal liability notwithstanding the usual corporate protections. In other words, responsible officers can not turn a blind eye or hide behind a corporate shield, but they must timely correct violations that are deemed a danger to life, health or safety. (Dept. of Housing Preservation and Development of the City of New York v Livingston, 169 Misc 2d 660 [App Term 2d Dept 1996]; Dept. of Housing Preservation and Development of the City of New York v Chana Realty Corp., NYLJ, June 7, 1993 [App Term 1st Dept].) Moreover, plaintiffs do not address a glaring inconsistency in their argument in that, had Poch not appeared for Arfa and Shpigel in the HP Proceedings, a default judgment would nonetheless have been entered against them due to their failure to appear. (Calabro Aff., at ¶ 11.) "

 

 

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Be Very Careful What You Say and to Whom

Plaintiff owes three banks, and one of them is really trying to recover its money.    Plaintiff recently transferred his home ownership to his wife.  Plaintiff goes to an attorney to discuss how to shield an upcoming inheritance from his father.  The attorney is willing to take two of the three cases, but not the third, because it represents the bank which is really trying to recover its money.  Plaintiff discloses all his financials to the attorney.

When another attorney is able to settle the bank debt for 35%, all seems good.  Then the bank calls and says, "no deal,"  It seems that they know about the house and the inheritance.  How?

 In  Rubinstein v Kriss & Feurstein  2013 NY Slip Op 31575(U)  July 12, 2013  Sup Ct, NY County
Docket Number: 653136/12  Judge: Saliann Scarpulla we see plaintiff lose the case. 

"1. Negligence
In the first cause of action, Plaintiff alleges negligence based on Defendants' violation of Rule 1.6 of the Rules of Professional Conduct. I grant Defendants' motion to dismiss this claim. A private cause of action cannot be based on a violation of the professional rules of conduct. Weintraub v. Phillips, Nizer, Benjamin, Krim & Balian, 172 A.D.2d 254, 254 (1 st Dep't 1991). 

2. Legal Malpractice
To prevail in a legal malpractice action, a plaintiff must demonstrate that he or she would have succeeded on the merits of the underlying action "but for" the attorney's negligence. Aquino v. Kuczinski, Vila & Assoc., P.c., 39 A.D.3d 216,218 (lst Dep't 2007).
Here, I grant Defendants' motion to dismiss the legal malpractice claim. Based on the documentary evidence and affidavits submitted, Defendants demonstrated that Plaintiff does not have a cause of action for legal malpractice because Defendants did not reveal any confidential information about Plaintiff to Valley National Bank. Defendants submitted an affidavit from Valley National Bank's vice president David Jacques, in which Jacques states that the bank's knowledge of Plaintiffs financial situation came from search of public records, conversations with former employees, or information provided Plaintiff himself. Defendants also demonstrated that the information about Plaintiffs house and the inheritance from his father was available in public records prior to the initial client meeting between Plaintiff and Defendants on April 23, 2010.
Plaintiff claims that issues of fact exist as to whether Skurman learned the information about his financial situation from Defendants. However, Plaintiff fails to raise a material issue of fact. Although Schoenwald stated in his affidavit that Valley National Bank's lawyer Paul Skurman informed him over the phone that "he had heard that Mr. Rubinstein [Plaintiff] had transferred his house into his wife's name and was expecting an inheritance from his fathers estate" - this statement does not in any way establish that Skurman learned this information from Defendants. Plaintiffs allegation  that Defendants revealed confidential information to Valley National Bank is vague and conclusory, and therefore his legal malpractice claim must be dismissed. Lester v. Braue, 25 A.D.3d 769, 769 (Ist Dep't 2006).

For the above reasons, I grant Defendants' motion to dismiss the second cause of action for legal malpractice.
 

3. Breach of Fiduciary Duty
An "attorney stands in a fiduciary relationship to the client which relationship is imbued with ultimate trust and confidence that imposes a set of special and unique duties, such as maintaining confidentiality." Beltrone v. Gen. Schuyler & Co., 252 A.D.2d 640, 641 (3d Dep't 1998); Ulico Cas. Co. v. Wilson, Elser, Moskowitz, Edelman & Dicker, 56 A.D.3d 1,9 (Ist Dep't 2008).
Here, I grant the Defendants' motion to dismiss the breach of fiduciary claim because it is duplicative of the legal malpractice claim. Plaintiff claims that Defendants breached their fiduciary duties by revealing confidential information and he seeks economic damages resulting from the breach. This is a duplicative claim that must be dismissed because it is based on the same allegations as the legal malpractice claim and seeks identical relief. Nevelson v. Carro, Spanbock, Kaster & Cuiffo, 290 A.D.2d 399, 400 (Ist Dep't 2002)."

 

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Criminal Real Estate Events and Legal Malpractice

Some of the defendants ended up in Federal prison, and some ended up being sued.  Plaintiff ended up owing on a mortgage and not owning the house.  It's all fallout of the mortgage crisis and now will go to trial.  Defendant attorney Dash was suspended for 5 years and the AD found that he co mingled his IOLA funds and aided a suspended attorney in the practice of law.

It's a mess.  Weston v 35 Plank Rd Realty Corp.  2013 NY Slip Op 31417(U)  July 2, 2013
Supreme Court, Richmond County  Docket Number: 104141/08  Judge: Joseph J. Maltese  "In this case the plaintiff was purportedly approached by Simon to help prevent a bank from foreclosing on property owned by the defendant Doud Elder. The plaintiff states that she never had any dealings with Doud Elder. In connection with this transaction, the plaintiff was found to qualify for a mortgage. Once it was determined that the plaintiff could qualify for a home loan, Home Savers promised payment in the amount of $10,000 to the plaintiff for her participation. According to the plaintiff she would obtain a mortgage for the purchase of Doud Elder’s home at 35 Plank Road, Staten Island, New York. Thereafter, pursuant to a side agreement executed at the closing Home Savers or Elder would make the mortgage payments.

The home closing took place on February 3, 2006. The defendant, Argent Mortgage Company, LLC, (“Argent”) provided and recorded a mortgage on the property. However, the defendant Reliant Abstract & Settlement Corp., failed to record the deed transferring 35 Plank Road, Staten Island, New York from Doud Elder to Lisa Weston. While Argent issued a mortgage in the name of Lisa Weston, not one payments has been made on that account. As a result of the foregoing facts, Lisa Weston remains financially obligated on the mortgage, but does not have a recorded ownership in the property. Consequently, Doud Elder continues to reside in the premises and not pay a mortgage. Furthermore, without being a record owner of the property, Weston is unable to evict Elder from the premises.

The Dash Defendants do not dispute that a fiduciary duty existed with the plaintiff. Instead, the Dash Defendants argue that plaintiff has not provided any evidence that constitute a breach of fiduciary duty. A breach of fiduciary duty arises from the violation of a relationship of trust and confidence.6 Here, Dash’s own testimony causes doubt as to whether he fully prepared  to conduct the real estate closing at issue here. Consequently, this cause of action must stand. The plaintiff’s nineteenth cause of action for legal malpractice requires a showing that the defendant attorney failed to exercise the ordinary reasonable skill and establish that the defendant attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession, and that the attorney’s breach of that duty proximately caused the plaintiff to sustain actual and ascertainable damages.7 Once again, the statements of Jan Dash during his deposition raise a question as to whether he properly conducted the real estate closing. Consequently, this cause of action must stand."

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A Primer on CPLR 321, 3212, Legal Malpractice and Much More

Caputo v Palermo, Palermo, & Tuohy, P.C.; 2013 NY Slip Op 31543(U) July 2, 2013
Sup Ct, Suffolk County Docket Number: 08-45481 Judge: Arthur G. Pitts is a case that could support a whole years trial/practice class.  It discusses in sharp detail issues of the standards of CPLR 3211, Legal Malpractice, Notices of Claim, obligations of an attorney to commence an action, Cruise ship releases, waivers, venue maritime law, proper standards of CPLR 3212, use of out-of-state affidavits, experts in legal malpractice, comparative negligence and much more.

For a thorough review of the law on all of these issues, we suggest a thorough reading of the case.

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Suing the Other Side's Attorney

What would happen if it were easy to sue the other side's attorney?  Presumably, after every litigation, the losing party would sue the winning party's attorney.  This is not a desirable goal, because it would simply lead to double/treble endless litigation.  For this reason, the rule of privity requires that except in the most extreme circumstances, you must have had a contractual relationship with the attorney you sue.

So it goes in Lombardi v Lombardi   2013 NY Slip Op 31478(U)  July 1, 2013 Supreme Court, Suffolk County  Docket Number: 12-24554  Judge: Hector D. LaSalle.  Wife sues Husband to overturn an antenuptual agreement, and sues his attorney too. 

"“In an action to recover damages for legal malpractice, a plaintiff must demonstrate that the attorney ‘failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession’ and that the attorney’s breach of this duty proximately caused plaintiff to sustain actual and ascertainable damages. To establish causation, a plaintiff must show that he or she would have prevailed in the underlying action or would not have incurred any damages, but for the lawyer’s negligence” (Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442, 835 NYS2d 534 [2007] quoting McCoy v Feinman. 99 NY2d 295,301-302,755 NYS2d 693 [2002]). The plaintiff must show that the attorney’s breach of 3 professional duty caused her actual damages in order to recover for legal malpractice; conclusory allegations of damages or injuries based upon speculation will not suffice (Holschauer v Fisher, 5 AD3d 553, 772 NYS2d 836 [2d Dept 20041). To succeed on a summary judgment motion dismissing a complaint in an action to recover damages for legal malpractice, a defendant must demonstrate that the plaintiff is unable to prove at least one of the essential elements of its legal malpractice cause of action (Gershkovich v Miller, Rosado & Algios, LLP, __- AD3d -, 945 NYS2d 567 [2d Dept 20121; Boglia v Greenberg 63 AD3d 973, 882 NYS2d 2 I5 [2d Dept 2009). Here, plaintiff seeks damages for legal malpractice as against defendant Courten. As plaintiff has failed to demonstrate that she retained defendant Courten to represent her in connection with any matter, she has failed to show that defendant Courten owed her any duty, let alone that she sustained damages as a result of a breach of that duty. Absent a duty to plaintiff, no negligence (malpractice) can be found against defendant attorney Courten. "

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Professionals are Professionals and Subject to COLR 214(6)

An action to recover damages for malpractice, other than medical, dental or podiartric malpractice, regardless of whether the underlying theory is based in contract or in tort" is subject to a 3 year statute.  More importantly, unless fraud is truly independent of, and not incidental to the professional representation, it too will be subject to a 3 year statute.

LSF6 Mercury Reo Investments LLC v Platinum  Appraisals  2013 NY Slip Op 31464(U)  July 3, 2013 Sup Ct, NY County  Docket Number: 153196/2012  Judge: Ellen M. Coin restates this twin set of rules for real estate appraisers.  "In this action, plaintiff LSF6 Mercury Reo Investments LLC
seeks to recover damages it allegedly suffered as a result of a faulty real estate appraisal conducted by defendants Platinum Appraisals and Joseph Barrara. Defendants move pursuant to
CPLR §3211 (a) (1), (5) and (7) to dismiss the complaint. "

"CPLR §214(6) states that a three-year statute of limitations applies to "an action to recover damages for malpractice, other than medical, dental or podiatric malpractice, regardless of
whether the underlying theory is based in contract or tort."  CPLR §214(6) does not define "malpractice."  A cause of action for fraud is generally governed by a six-year statute, running from the date of the fraud, or a two-year statute, running from the date the fraud was discovered, or could
have been discovered by reasonable means. (CPLR §213 (8); House of Spices (India), Inc. v SMJ Servs., Inc., 103 AD3d 848, 849 "

"The applicable statute of limitations is governed by the "gravamen" of the claim. (See Scot t v Fields, 85 AD3d 756, 758 [2 nd Dept 2011]). Hence, where a claim for fraud or misrepresentation is "merely incidental" to a claim for negligence or malpractice, the three-year statue for malpractice
will govern. (Nickel v Goldsmith & Tortora, Attorneys at Law, P.C., 57 AD3d 496, 496-97 [2 nd Dept 2008]; see also Frumento v On Rite Co., Inc., 66 AD3d 828, 830 [2 nd Dept 2009] [the "reality" or
"essence" of a claim, "not its form" determines whether it will be treated as a cause of action for fraud or for negligence] [internal quotation marks and citation omitted]). Similarly, a breach of contract which is really a restatement of a professional malpractice claim will be governed by the three-year statute applicable to such claims. (Matter of R.M. Kliment & Francis Halsband, Architects (McKinsey & Co., Inc.), 3 NY3d 538, 541-42 [2004])."

 

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Neither Contribution Nor Indemnity

Plaintiff hires attorney 1 and after a while begins to court Attorney 2.  Meanwhile, back at home, no one is looking after affairs, and the litigations begin to unravel. Who is at fault?

Devonshire Surgical Facility, LLC v Law Offs. of Leo Tekiel,   2013 NY Slip Op 31441(U)
July 3, 2013  Supreme Court, New York County  Docket Number: 105558/07
Judge: Cynthia S. Kern describes the duties and obligations of the attorneys in this third-party dismissal motion. 

"Third- party defendant Kenneth L. Kutner, Esq. (“Kutner”) has brought the present motion for summary judgment dismissing the third-party complaint as against him. For the reasons stated below, the motion is granted and the third-party complaint is dismissed as against Kutner.

The relevant facts are as follows. Kutner is an attorney. He alleges that in 2004, he was advised by a friend of his, Mr. Einiger, that a client of Mr. Einiger, Dr. Allan Chamberlain, may have a cause of action against various insurance companies for improperly denying insurance payments for medical services rendered. Kutner agreed with Mr. Einiger to cooperatively investigate the claims regarding misconduct by the insurance companies with regard to denying payments to Dr. Chamberlin’s medical practices Devonshire Surgical Facility, LLC (“Devonshire) and Carnegie Hall Orthopedic Services, P.C. (“Carnegie”) and to assist in commencing a case in Supreme Court against several of the offending insurance companies. This action was commenced in September 2004. In connection with the Supreme Court action, Hoffinan, Einiger and Polland , PLLC was directly retained by Dr. Chamberlin.Kutner was never directly retained by Dr. Chamberlin in the Supreme Court action but was retained by Mr. Einiger’s firm to assist in the Supreme Court action.

The Travelers Action sought payment for medical services rendered by Dr. Chamberlin’s medical practices to fourteen of Travelors’ insureds under no fault insurance coverage. The Tekiel defendants had assumed the representation in the Travelors Action from prior counsel in the matter, Paul Solda, Esq. After the plaintiffs in the Travelors Action failed to respond to discovery requests which Travelors had served on them, Travelors filed a motion to dismiss the Travelors Action pursuant to CPLR 3 126 for the continued failure to provide the requested discovery in March 2004. After Travelors filed the motion to dismiss, Kutner sent a letter to Mr. Tekiel dated March 25,2004 in which he requested, inter alia, that Mr. Tekiel furnish him with all captions and index numbers of actions already commenced so that Kutner could prepare substitution of attorney forms. In response to this letter, Tekiel sent Kutner correspondence dated March 26,2004 which included a list of nineteen commenced actions with regard to the Tekiel Defendants’ representation of Chamberlin’s medical practices. The list included the Travelors Action and noted that a motion to dismiss was returnable on April 5,2004 and that discovery had not been provided. On or about May 10,2004, Kutner again sent a letter to Tekiel requesting that Tekiel adjourn Travelors’ motion to dismiss so as to permit Kutner and his co-counsel to “finalize the anticipated substitution of attorneys in the case” being handled for Dr. Chamberlin. On May 1 1,2004, on the return date of the motion to dismiss, the Tekiel Defendants, through per diem counsel, stipulated in the Travelors action to a self executing conditional order of preclusion if the requested discovery was not provided within sixty days.

Based on this court’s finding that Kutner never owed any duty to represent plaintiffs in the Travelors Action, there can be no valid third party claim for contribution. In order to determine whether a third party action for contribution exists, “the critical issue is whether the third- party defendant owed a duty to the plaintiff which was breached and which contributed to or aggravated plaintiffs’s damages.” Rosner v. Paley, 65 N.Y.2d 736,738 (1985). Since this court has already determined that Kutner did not owe any duty plaintiffs in the Travelors Action since he never represented them in that action, he cannot be found to have contributed to plaintiffs’ injuries in that action and cannot be found liable for contribution. ’ The cause of action for contribution is also insufficient as a matter of law because the damages sought in the underlying action are purely monetary. Under New York’s contribution statute, “two or more persons who are subject to liability for damages for the same personal injury, injury to property or wrongful death, may claim contribution among them whether or not an action has been brought or a judgment has been rendered against the person from whom contribution is sought.” CPLR 6 140 1. Board of Educ. of Hudson City School Dist. v. Sargent, Webster, Crenshaw & Folley, 71 N.Y.2d 21,26 (1987). The law is clear that where “the
underlying claim seeks purely economic damages, a claim for common-law contribution is not
available.” Children’s Corner Learning Center v. A Miranda Contracting Corp., 64 A.D.3d 3 18,323 (1” Dept 2009). “[Tlhe determining factor as to the availability of contribution is not the theory behind the underlying claim but the measure of damages sought.” Rockefeller University v. Tishman Construction Corp., 240 A.D.2d 341 (1” Dept 1997). If the damages sought are to be placed in as good a position as one would have been but for the acts being sued upon, then the claim is for economic damages. Children’s Learning Center, 64 A.D.3d at 324. "

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Are Legal Malpractice Cases Wrongly Dismissed?

From time to time we muse over whether legal malpractice cases are unfairly treated or exposed to a higher degree of scrutiny.  We wonder whether the fact that the rules for legal malpractice are structured by attorneys, are applied by attorneys and deal only with attorneys creates an institutional bias.

Barnave v Davis   2013 NY Slip Op 05184   Decided on July 10, 2013   Appellate Division, Second Department  requires one to ask how Supreme Court could have dismissed this case.  Was it because plaintiff was pro-se?
 

"Here, contrary to the Supreme Court's determination, the defendant failed to establish his prima facie entitlement to judgment as a matter of law dismissing the complaint. As a result of the plaintiff's counsel's failure to appear at a scheduled compliance conference in the underlying action, the underlying action was ultimately dismissed. Contrary to the defendant's contention, the evidence he submitted in the present action in support of his motion for summary judgment dismissing the complaint did not establish, prima facie, that he no longer represented the plaintiff at the time of that default. The defendant acknowledged in an affidavit submitted in support of his motion that, after the default, he assisted the plaintiff in his efforts to have the underlying action [*2]restored to the calendar, stating, inter alia, that he "use[d] law office failure as the reason [he] did not appear" on behalf of the plaintiff in the underlying action. Therefore, the defendant failed to establish, prima facie, that the plaintiff could not prove breach of duty based on the alleged failure to appear. Furthermore, contrary to his contention, the defendant failed to establish, prima facie, that the plaintiff's conduct negated any negligence by the defendant and constituted the sole proximate cause of the dismissal of the underlying action. Accordingly, the defendant's submissions in support of his motion for summary judgment did not establish, prima facie, that the plaintiff will be unable to prove at least one element of his legal malpractice claim and, thus, the defendant failed to demonstrate his entitlement to judgment as a matter of law (see Affordable Community, Inc. v Simon, 95 AD3d at 1048; Mueller v Fruchter, 71 AD3d 650, 651; Rosenstrauss v Jacobs & Jacobs, 56 AD3d 453, 454). In light of our determination, we need not address the sufficiency of the plaintiff's opposition papers (see Affordable Community, Inc. v Simon, 95 AD3d at 1048; see generally Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853).

Accordingly, the Supreme Court should have denied the defendant's motion for summary judgment dismissing the complaint. "

 

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Judiciary Law 487 and Exiting the Case

Attorneys and clients have a unique compensation arrangement in contingent fees.  It's almost unheard of for people to get paid only on success.  Doctors get paid for treating you, not for curing you.  Plumbers get paid for showing up, and then get paid more for doing the work.  Lawyers often work on contingent plans where they agree to take the case, work the case, pay for the expenses of the case, and then make money if they are successful.  It's an arrangement that works well if everyone keeps to the rules.

What happens when an attorney decides that he has paid enough of the expenses and now demands that the client put up some money?  We see one outcome in Palmieri v Biggiani
2013 NY Slip Op 05194  Decided on July 10, 2013   Appellate Division, Second Department.  Client alleges that attorney demanded expenses during the case after the defendant insurer marked the case "no pay".  Of course, the contingent arrangement was that the attorney bear the expenses and the risk.
"On July 25, 2007, the parties stipulated to the substitution of the defendant as counsel (hereinafter the July 2007 stipulation). On August 12, 2008, the Supreme Court dismissed the underlying action. The parties dispute the basis for the August 2008 dismissal. The plaintiff alleges that the August 2008 dismissal was based on the Supreme Court's determination that more than one year had elapsed between the July 2005 order entered on the plaintiff's default and the May 2007 order vacating that default and restoring the action to the trial calendar, and that the underlying action was, thus, not restorable pursuant to the May 2007 order. He further alleges that, inasmuch as the defendant first withdrew as counsel under false pretenses, and had been reinstated as counsel in May 2007, the defendant's failure to timely rectify the consequences of the March 2006 dismissal of the underlying action constituted legal malpractice. The defendant contends that the August 2008 dismissal was based on the failure of the plaintiff's subsequent counsel to prosecute the underlying action. The only documentary evidence in the record as to the court's reason for the August 2008 dismissal was an entry in the Supreme Court's computerized calendar record indicating that the underlying action was dismissed "PER SFO J.EDB 3-23-2006."

The plaintiff thereafter commenced the instant legal malpractice action, and the defendant moved, in effect, to dismiss the amended complaint pursuant to CPLR 3211(a)(1), (5), and (7). In an order dated July 5, 2011, the Supreme Court granted that branch of the defendant's motion which was to dismiss the cause of action alleging legal malpractice, based on its conclusion that documentary evidence established that the underlying action was ultimately dismissed more than one year after the defendant was relieved as counsel, that events subsequent to the substitution of counsel could not be attributed to the defendant, and that, as a matter of law, the defendant's refusal to advance the expert's fee was not a proximate cause of the August 2008 dismissal. The Supreme Court also directed the dismissal of the causes of action alleging breach of contract, fraud, breach of fiduciary duty, and deceit as duplicative of the cause of action alleging legal malpractice. It further directed the dismissal of the remaining causes of action for failure to state a cause of action. In a judgment entered August 2, 2011, the Supreme Court dismissed the amended complaint. "

"Contrary to the Supreme Court's conclusion, the plaintiff stated a cause of action alleging violation of Judiciary Law § 487 (see CPLR 3211[a][7]; Judiciary Law § 487; Amalfitano v Rosenberg, 12 NY3d 8, 14; Rock City Sound, Inc. v Bashian & Farber, LLP, 74 AD3d at 1172; Boglia v Greenberg, 63 AD3d 973, 975; Kempf v Magida, 37 AD3d at 764; Izko Sportswear Co., Inc. v Flaum, 25 AD3d 534, 537). The plaintiff alleged in the amended complaint that the defendant's assertion, made in support of the motion to be relieved as counsel, that the plaintiff "steadfastly refused to pay the litigation expenses," was knowingly false and was offered with the intent to deceive the Supreme Court into believing that the defendant originally had sufficient cause to be relieved as counsel (see Dupree v Voorhees, 102 AD3d 912, 913). Thus, the Supreme Court should have denied that branch of the defendant's motion which was to dismiss the cause of action alleging a violation of Judiciary Law § 487. "

 

 

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Fee Arbitration, De Novo Litigation and Attorney Fees

Today's New York Law Journal article by Brendan Pierson highlights the New York fee dispute apparatus.  Either attorney or client can trigger an arbitration, and if either is dissatisfied with the result, can request a de novo court case.  What is fascinating about this case is the lack of caution and apparent bad judgment on the part of the attorney.

"A Manhattan lawyer was ordered to turn over all but $750 of more than $22,000 he collected from two clients after a judge determined the attorney billed the clients up to $450 an hour for time he spent brushing up on basic legal principles.

The clients, Gerald and Vivian Kleinerman, hired Ronny Buni in March 2011 to represent them in litigation against their co-op board, which was already in progress. In June 2011, Buni told the Kleinermans that he would not do any more work on the matter, citing an unpaid invoice for $6,239.

The matter went to the court system's fee dispute resolution program, an arbitration program pursuant to Part 137 of the Rules of the Chief Administrator. An arbitrator awarded the Kleinermans $5,000.

However, Buni initiated a new case in Manhattan Civil Court against the couple, seeking to recover the $6,239 bill minus the $5,000 arbitration award. The Kleinermans, for their part, sought return of all the money they had paid to Buni throughout the litigation, a total of $22,371."
 

"According to Nervo, Buni reviewed the litigation file, followed up on discovery requests already made by the parties before his involvement, attended a single status conference and "sent innumerable emails to his clients, some of which included berating them for their reasonable input into the matter."

While working on the case, Nervo said, Buni billed the couple up to $450 an hour for activities that he should not have billed.

According to bills quoted by Nervo, these included discussing filing a notice of appearance and contacting opposing counsel; doing an "attorney search" for the law clerk of the judge presiding over the case, Manhattan Supreme Court Justice Milton Tingling, "for purpose of determining his tenure and background" before calling chambers; reviewing the Civil Procedure Laws and Rules to determine the consequences of failing to demand expert information before the close of discovery; and reviewing case law "to survive [summary judgment] and prevail at trial," though no summary judgment motion had been filed.

Nervo cited as another example of Buni's "remarkable billing practices" an hour and a half spent writing a letter to Tingling seeking an expansion of time for discovery, even though Tingling had denied an identical request by phone the previous day.

Finally, Nervo noted an "inappropriate, if not bizarre" bill for time Buni spent consulting with a retired attorney he knew about how best to handle the case.

"A client should not be charged for an attorney's need to consult others because of that attorney's inability to determine how best to represent that client," Nervo said. "The client is not responsible for an attorney's need to obtain his or her own legal advice. Once plaintiff determined that he was incapable of representing defendants, rather than bill these clients for his own lack of legal knowledge he should have moved to withdraw at that time and not continue to build up legal fees.""
 

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Judiciary Law 487 and Conflicts in the Big Leagues

The confluence of money, crime and high-stakes litigation is titillating.  When we read about people paying $108 in restitution, then facing RICO claims from the mother-in-law, and then being sued for deceit under Judiciary Law 487, it seems like a movie.

In today'sNew York Law Journal, Andrew Keshner writes about Ira Lee Sorkin, Judd Burstein and Jonathan Winston. 

"An adversary is seeking triple damages from Ira Lee Sorkin of Lowenstein Sandler for allegedly telling a federal judge "outright lies" about his possession of a privileged document that contributed to the judge's decision to disqualify Sorkin from the case.

Last November, Eastern District Judge Arthur Spatt, sitting in Central Islip, disqualified Sorkin from pressing a civil racketeering suit against real estate developer Jonathan Winston. Spatt noted Sorkin's prior representation of Winston and Sorkin's possession of a memorandum that Winston's defense attorneys drafted but never filed in court seeking to terminate Winston's probation after he pleaded guilty to conspiracy to commit securities fraud and conspiracy to commit money laundering.

Spatt said Sorkin offered "varying accounts" of how he got the memo, which, Spatt added, was "clearly protected under the work product privilege" (NYLJ, Nov. 27, 2012).

After Spatt dismissed the civil racketeering suit on July 3, Winston filed suit against Sorkin on Tuesday in Nassau County Supreme Court under Judiciary Law §487, alleging Sorkin "engaged in deceit with intent to deceive the Court," when he explained to Spatt how he got the draft memorandum. "

The complaint in Winston v. Sorkin, 8227/13, argues that Sorkin first "improperly made use of an unquestionably privileged draft of a proposed court filing" as he prepared the civil racketeering suit. Then, "when counsel for Winston discovered Sorkin's improper use of the Probation Memo, Sorkin embarked upon a course of deceitful conduct that involved offering numerous, conflicting explanations of how he came into possession of the Probation Memo, culminating in outright lies made in Court."


"Represented by Judd Burstein of Manhattan, Winston seeks damages of three times the cost of litigating the disqualification motion.

Burstein in an interview estimated legal bills connected to the case at about $100,000 and stressed the underlying case was "entirely frivolous" and a "fraud."

Sorkin said he had not yet seen the suit and declined further comment.

In 1999, Winston retained Sorkin to represent him after the National Association of Securities Dealers—the predecessor of the Financial Industry Regulatory Authority—launched a probe into Winston and his securities brokerage firm, First United Equities Corporation.

When Winston became aware that he was also the subject of a criminal probe by the Eastern District U.S. attorney, he asked Sorkin to defend him but Sorkin declined, citing a conflict of interest"

 

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When Does the Statute of Limitations Begin to Run?

There is no "discovery" rule in New York for the commencement of the legal malpractice statute of limitations.  As the Court in Elstein v Phillips Lytle, LLP   2013 NY Slip Op 05132   Released on July 5, 2013   Appellate Division, Fourth Department   points out, "A cause of action for legal malpractice accrues when the malpractice is committed."  However, there is a small exception to this bedrock principal, and it is originally cited in McCoy v. Feinman.  The Appellate Division, 4th Department discussed the case:

"Memorandum: In this legal malpractice action, plaintiffs appeal from an order granting the motion of Phillips Lytle, LLP and Albert M. Mercury (defendants) seeking dismissal of the complaint against them as time-barred. Plaintiffs contend that Supreme Court erred in determining the accrual date of their action, for legal malpractice. We reject that contention. " A cause of action for legal malpractice accrues when the malpractice is committed' " (Amendola v Kendzia, 17 AD3d 1105, 1108; see Glamm v Allen, 57 NY2d 87, 93). "In most cases, this accrual time is measured from the day an actionable injury occurs, even if the aggrieved party is then ignorant of the wrong or injury' " (McCoy v Feinman, 99 NY2d 295, 301, quoting Ackerman v Price Waterhouse, 84 NY2d 535, 541). " What is important is when the malpractice was committed, not when the client discovered it' " (id., quoting Shumsky v Eisenstein, 96 NY2d 164, 166). Here, the alleged malpractice occurred no later than 2003, when plaintiff Daniel Elstein completed his acquisition of plaintiff Hilton Enterprises, Inc. (Hilton) from defendant Alfred D. Spaziano. Indeed, there is no indication in the record that defendants represented plaintiffs after that date. This action was not commenced until approximately eight years later, on March 4, 2011, and is thus time-barred under the applicable three-year statute of limitations (see CPLR 214 [6]).

We reject plaintiffs' contention that they were unable to sue defendants for malpractice until March 7, 2008, when the judgment was entered against Hilton, inasmuch as that is when they sustained an actionable injury. As the Court of Appeals has made clear, a malpractice claim becomes actionable when the plaintiff's damages become "sufficiently calculable" (McCoy, 99 [*2]NY2d at 305; see Ackerman, 84 NY2d at 541-542), and, here, plaintiffs' damages arising from the alleged legal malpractice were sufficiently calculable in January 2007, when plaintiffs learned of the alleged malpractice, if not sooner. "


 

 

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A Wasted Trial in Legal Malpractice

We often wonder whether legal malpractice cases are treated with a type of royal exasperation by judges. Often the feeling in the air is that legal malpractice cases maybe should not be brought, or that it's somewhat shameful to bring one, or that perhaps attorneys are due a little extra consideration. We wonder if that's what happened in Burbige v Siben & Ferber ; 2011 NY Slip Op 07794 ; Decided on November 1, 2011 ; Appellate Division, Second Department.
 

Did the judge just want to get this case over with?

"The plaintiff commenced this legal malpractice action alleging, inter alia, that the defendants were negligent in failing to diligently prosecute a products liability action against the manufacturer of a ladder which broke while the plaintiff was descending it. After the conclusion of opening statements, the defendants' counsel moved, in effect, pursuant to CPLR 4401 for judgment as a matter of law or, in the alternative, for an offer of proof. The trial court reserved decision. However, before the close of the plaintiff's case, the court granted the defendants' motion based upon the plaintiff's failure to make an offer of proof that he would have been successful in the underlying products liability action by offering expert testimony that the ladder from which he fell was defective.

The trial court erred in granting that branch of the defendants' motion which was, in effect, pursuant to CPLR 4401 for judgment as a matter of law, and dismissing the action before the plaintiff rested (see CPLR 4401; Greenbaum v Hershman, 31 AD3d 607; McGhee v New York City Hous. Auth., 243 AD2d 544; Goldstein v C.W. Post Ctr. of Long Is. Univ., 122 AD2d 196). A motion for judgment as a matter of law is to be made at the close of an opposing party's case or at any time on the basis of admissions (see CPLR 4401), and the grant of such a motion prior to the close of the opposing party's case generally will be reversed as premature even if the ultimate success of the opposing party in the action is improbable (see Cass v Broome County Coop. Ins. Co., 94 AD2d 822; see also Canteen v City of White Plains, 165 AD2d 856; Goldstein v C.W. Post Ctr. of Long Is. Univ., 122 AD2d at 197; Page v City of New York, 79 AD2d 573; Cetta v City of New [*2]York, 46 AD2d 762; Budner v Giunta, 16 AD2d 780; cf. Clifford v Sachem Cent. School Dist. at Holbrook, 271 AD2d 470, 470-471). Therefore, the judgment must be reversed and a new trial granted to the plaintiff. "
 

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Multiple Contractors and Legal Malpractice

In New York City condominiums are a rich source of litigation. At the ownership level, one sees litigation over the buying and selling; at a personal injury level, one sees slips and falls. In the construction of the buildings, negligence and indemnification between general contractors and subs is an ongoing field of law. Here, in Flintlock Constr. Servs., LLC v Rubin, Fiorella &
Friedman LLP
; 2012 NY Slip Op 31835(U) July 9, 2012 Supreme Court, New York County
Docket Number: 109657/2011 judge: Saliann Scarpulla we see how the insurance carriers move their attorneys around in a never ending circle of litigation.

"As alleged in the complaint, FCS is a general contractor, and RFF is a law firm which was designated by FCS’s insurer to represent FCS in a construction dispute. CS states in the complaint that on or about March 30, 2004, FCS entered into a standard AIA form contract with owner Well-Come Holdings, LLC (“Well-Come”) (the contract”) for the construction of an 8-story condominium apartment project located at 06 Mott Street, in New York City (the “Mott Street project”). FCS alleges that pursuant o the contract, “FCS’s responsibilities were limited and its indemnification obligations ere limited to damages caused by its own conduct; it had not indemnity or other obligations with respect to the scope of work reserved for Well-Come, and . . . it had no obligations to indemnify Well-Come for Well-Come’s own negligence or that of Well- Come’s subcontractors or ~consultants.~F’C S also pleads that it was required to provide insurance to protect FCS and Well-Come from claims of property damage stemming from performance of the contract.

FCS alleges that during the early stages of construction at the Mott Street project in the summer of 2004, one or more ‘Occurrences”to took place which allegedly caused property damage to three adjacent property owners. These owners filed three separate lawsuits in Supreme Court, New York County, against Well-Come, FCS and some of Well-Come’s subcontractors and consultants (the “underlying litigation”). Well-Come was originally defended in the underlying litigation by Marine pursuant to its liability policy. FCS was defended by American Safety, which assigned the defense to RFF. FCS alleges that at various times from 2004 through 2009, RFF defended
multiple claims asserted by numerous parties against FCS at the request and direction of American Safety or American Safety Indemnity Company,’ and that RFF regularly reported to American Safety’s claims personnel about developments and strategies in the defense of the claims against FCS.

At some point, FCS and American Safety came to an agreement whereby FCS would pay the cost of its defense in any given claim up to and including the amount of the self-insured retention under its American Safety policy. Upon exhaustion of the self insured retention for each claim, as alleged in the complaint, American Safety would pay for FCS’s defense. FCS alleges in the complaint that although both American Safety and FCS are named as defendants in the declaratory judgment action, RFF entered an appearance and filed pleadings only on behalf of FCS. Further, FCS alleges that American Safety admitted in the declaratory judgment action that it issued both primary and excess coverage to FCS as required by the contract, but denied that Well-Come was an
“additional insured” under its policy or that it had any duty to defend or indemnify Well- Come as an additional insured under any insurance policy issued by American Safety to FCS.
 

Here, the underlying litigation is still pending, therefore Well-Come’s negligence remains an open question. And as RFF acknowledges in reply, before it can be determined whether FCS suffered damages caused by the execution of the stipulation of dismissal, it must first be determined whether Well-Come was negligent.Moreover, FCS has sufficiently pled the existence of actual damages. FCS states in the complaint that because of the stipulation of dismissal, it now faces a claim by Well- Come and its insurer for in excess of $100,000 in attorneys’ fees and expenses incurred in the defense of Well-Come in the underlying litigation. While FCS also alleges future,
speculative damages, the claims it already faces from Well-Come for attorneys’ fees are real and ascertainable, and sufficient to plead a cause of action for legal malpractice, established by FCS’s submission of correspondence from Well-Come’s counsel requesting payment in the amount of $100,395.98. Accordingly, the first and second causes of action of the complaint can not be dismissed."
 

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Multiple Causes and Legal Malpractice

While we understand the principal, it is nevertheless shocking to read a case in which the defendant attorney admits that they blew the statute of limitations, but argue that plaintiff had no case anyway.  It just seems wrong, somehow. 

In Hagensen v Ferro, Kuba, Mangano, Skylar, Gacovino & Lake, P.C. 2013 NY Slip Op 04980
Decided on July 2, 2013   Appellate Division, First Department   the court rejected a motion for summary judgment. 

"Defendant failed to timely serve the pleadings in an underlying personal injury action it commenced on plaintiff's behalf, and the action was dismissed on statute of limitations grounds. Defendant moved for summary judgment in the instant action, alleging that plaintiff could not establish the proximate cause element of the malpractice claim (see generally Wo Yee Hing Realty, Corp. v Stern, 99 AD3d 58, 62-63 [1st Dept 2012]). Defendant argues that plaintiff's evidence failed to raise a triable issue that "but-for" defendant's negligence, plaintiff would have been successful in the underlying action.

Plaintiff's deposition testimony that she fell on loose gravel and/or small rocks on the paved surface of the driveway of the premises she rented, and that the area of the driveway on which she fell was somewhat obscured from view by a parked car, raises factual issues as to whether the cause of her fall was attributable to the loose gravel condition. Any inconsistencies in plaintiff's testimony as to the cause of her fall raise credibility issues for the jury (see Cuevas v City of New York, 32 AD3d 372, 373 [1st Dept 2006]).

Defendant's argument that plaintiff's preexisting medical conditions compromised her ability to ambulate and was the cause of her fall is not supported by the evidence and, in any event, the testimony by plaintiff alone raises triable issues as to whether her fall was attributable to the loose gravel/small rock condition on the driveway. There can be more than one proximate [*2]
cause of an accident, and a plaintiff need not exclude every other possible cause apart from the landowner's alleged breach of its duty owing to the plaintiff (see Lopez v 1372 Shakespeare Ave. Hous. Dev. Fund Corp., 299 AD2d 230, 232 [1st Dept 2002]). "


 

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Bankrutpcy Ends the Case

The interplay of bankruptcy and personal injury or legal malpractice cases is complicated. Basically, once one files a Chapter 7 petition, all assets, including the penny in petitioner's pocket becomes part of the Bankruptcy estate. That estate includes any personal injury claims, and even any future legal malpractice claims. If they are listed in the schedules, then the trustee has the right to litigate and collect for the creditors. If they are not, then, for the most part, they will be lost to the plaintiff. Here, in Santonocito v Moskowitz, Passman & Edelman; 2012 NY Slip Op 30580(U)
Supreme Court, New York County ;Docket Number: 114418-2010; Judge: Judith J. Gische we see a plaintiff who has a good legal malpractice case lose it all.

"On June 1,2004, prior to filing the personal injury action, plaintiff and his wife flied a voluntary petition for bankruptcy under Chapter 7 of the bankruptcy ("bankruptcy petition"). The Santonocitos brought the petition pro-se, but a legal services company (We the People) prepared and filed the petition on their behalf, charging them a $229 fee.


Schedule B of the bankruptcy petition requires that the debtor "list all personal property of the debtor of whatever kind." Item 20 requires that the debtor lid "Other contingent and unliquidated claims of every nature, including tax refunds, counterclaims of the debtor, and rights to setoff claims. Give estimated values." Item 17 of Schedule B requires the debtor to also list "Other liquidated debts owing to debtor, including tax refunds." The Santoncitos response was that they had "Proceeds from Auto Accident"

"When a debtor files for bankruptcy protection, this creates an "estate' comprised of 'ail legal and equitable interests of the debtor as of the commencement of the case (1 1 USC 541 [a][1]. A pre-petition injury qualifies as a legal interest, within the meaning of the statute (In re Corbi, 149 B.R. 325,329 [Bankr.E.D.N.Y.l993]) and a debtor is required to disclose in its bankruptcy petition any causes of action that would be brought by the debtor (Kunica v. St. Jean Financial Inc., 233 8.R. 46 [SDNY l999Q]). This is for the benefit of the creditors (Kunica v. St. Jean, supra). If the debtor fails to list a claim, "an unscheduled claim remains the property of the bankruptcy estate... Crawford v. Franklin Credit Management Corp., ., -B .R.--, 201 1 WL 1118584 [S.D.N.Y. 2011; also Bromley v. Fleet, 240 AD2d 611 (2d Dept 1997), Consequently, the debtor lacks standing to bring a lawsuit in connection with such claims after emerging from bankruptcy, and if s/he does, the lawsuit must be dismissed."
 

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It's 3 Years, It's 3 Years, It's 3 Years...

Some years ago the Legislature overruled the Court of Appeals, and passed CPLR 214(6). That statute was interpreted to say that all claims against an attorney (some other professionals) were subject to a 3 year statute, whether the claim was made in negligence or contract.

Here, in Walter v Castrataro 2012 NY Slip Op 02676, Appellate Division, Second Department we see a plaintiff unsuccessfully attempting to get the benefit of a typical 6 year statute for breach of contract.

"On April 16, 2003, the plaintiff signed a retainer agreement, wherein the defendant agreed to represent her in a matrimonial action. By letter dated July 1, 2003, the plaintiff terminated the defendant's representation. On June 11, 2009, the plaintiff commenced this action, alleging in [*2]her complaint that the defendant "negligently failed to represent the Plaintiff and breached her duties" and "[a]s a result of the Defendant's breach of contract the Plaintiff has suffered substantial damages[.]" The defendant moved, inter alia, for summary judgment dismissing the complaint on the ground that the complaint sounded in legal malpractice and, thus, was barred by the applicable three-year statute of limitations (see CPLR 214[6]). In her opposing affidavit, the plaintiff stated that she "may have inadvertently misused language on the Summons and Complaint. However, the object of the said application served upon Defendant asserts breach of contract verbatim and notably, Plaintiff never uses the term Legal malpractice" (emphasis in original). In her affidavit, the plaintiff alleged numerous "breaches" by the defendant in connection with the underlying matrimonial action, including a failure to file an application for pendente lite support, failure to move to vacate a certain forensic report, and failure to "modify" a certain stipulation. The Supreme Court, among other things, granted that branch of the defendant's motion which was for summary judgment dismissing the complaint as time-barred.

The complaint is "nothing more than a rephrasing of the claim of malpractice in the language of breach of contract" (Mitschele v Schultz, 36 AD3d 249, 252). The defendant satisfied her initial burden by demonstrating, prima facie, that the complaint sounded in legal malpractice and that the three-year statute of limitations began to run no later than July 1, 2003 (see Sladowski v Casolaro, 84 AD3d 1056, 1057). In opposition, the plaintiff failed to raise a triable issue of fact, e.g., by submitting proof demonstrating that the statute of limitations was tolled by the continuous representation doctrine, or otherwise (see Tsafatinos v Lee David Auerbach, P.C., 80 AD3d 749, 750). Accordingly, the Supreme Court properly concluded that the action, commenced almost six years after the alleged legal malpractice was committed, was barred by CPLR 214(6), and, thus, properly granted that branch of the defendant's motion which was for summary judgment dismissing the complaint as time-barred. "
 

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A Trip and Fall Case, Now a Legal Malpractice Case

Client trips and falls because of a defect in a parking lot. Client goes to attorney who fails to commence the case within the statute of limitations. Client sues attorney who comes up with very inventive defenses. What happens to the case on summary judgment?

inDuque v Perez 2012 NY Slip Op 03593, Appellate Division, Second Department plaintiff wins, so far. "The plaintiff Jairo Duque (hereinafter Duque) allegedly slipped and fell in a hole in a parking lot at a medical facility in Middletown. He and his wife allegedly retained the defendant attorneys to commence a personal injury action on his behalf (hereinafter the underlying action). After the statute of limitations had expired, the medical facility filed an answer containing an affirmative defense that it did not own the property. The defendant Allan Kuslansky presented the plaintiffs with a general release, which they executed, and informed them that Duque had "a better medical malpractice case" against the doctor who, after the accident, performed surgery on Duque's knee. The underlying action was discontinued. "

"Here, Perez and Lewis failed to meet their prima facie burden of establishing their entitlement to judgment as a matter of law, as the evidence they submitted failed to eliminate a triable issue of fact as to whether there was an attorney-client relationship between them and the plaintiffs (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853; Nelson v Roth 69 AD3d 912, 913). Moreover, contrary to their contention, Perez and Lewis failed to establish, prima facie, that the legal malpractice cause of action was time-barred (see 730 J & J, LLC v Polizzotto & Polizzotto, Esqs., 69 AD3d 704, 705). Further, all of the defendants failed to meet their prima facie burden of establishing their entitlement to judgment as a matter of law, since they failed to submit evidence supporting their contention that their alleged malpractice did not cause the plaintiffs to sustain any losses because the plaintiffs would not have been able to establish that the premises owner had actual or constructive notice of the alleged defective condition.

Accordingly, since the defendants failed to meet their prima facie burden on their motions for summary judgment, those branches of the defendants' respective motions which were for summary judgment dismissing the cause of action alleging legal malpractice insofar as asserted against each of them were properly denied, regardless of the sufficiency of the plaintiffs' opposition papers (see Winegrad v New York Univ. Med. Ctr., 64 NY2d at 853). "
 

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Reflexive Legal Malpractice Cases

Insurers tell insureds that legal fee cases are the surest way of starting a legal malpractice case. In Blank Rome, LLP v Parrish ;2012 NY Slip Op 00820 ;Decided on February 7, 2012 ;Appellate Division, First Department we see how this develops.

"Order, Supreme Court, New York County (Jeffrey K. Oing, J.), entered on or about March 25, 2011, which, in an action to recover unpaid legal fees, denied the motion of third-party defendants Bouchard Margules & Friedlander, P.A. and David Margules (collectively BMF) to dismiss the third-party complaint for indemnification and contribution, and granted plaintiff/third-party plaintiff Blank Rome LLP leave to amend the third-party complaint, unanimously modified, on the law, to dismiss Blank Rome, LLP's cause of action for indemnification and to allow amendment of the third-party complaint to the extent of asserting additional allegations in furtherance of its cause of action for contribution, and otherwise affirmed, without costs.

"Insofar as the third-party and proposed amended third-party complaints allege that BMF represented defendant, agreed to represent him with respect to the issues giving rise to the legal malpractice alleged in defendant's counterclaims, and that BMF was negligent with respect to such representation, the motion court properly declined to dismiss Blank Rome's third-party claims for contribution since this cause of action was sufficiently pleaded (see Schauer v Joyce, 54 NY2d 1, 5 [1981] ["two or more persons who are subject to liability for damages for the same personal injury, injury to property or wrongful death, may claim contribution among them"] [internal quotation marks omitted]). However, the motion court erred when it denied BMF's [*2]motion to the extent it sought to dismiss the third-party cause of action for indemnification. In order to recover on a claim for common law indemnification, "the one seeking indemnity must prove not only that it was not guilty of any negligence beyond the statutory liability but must also prove that the proposed indemnitor was guilty of some negligence that contributed to the causation of the accident for which the indemnitee was held liable to the injured party by virtue of some obligation imposed by law" (Correia v Professional Data Mgt., Inc., 259 AD2d 60, 65 [1999]). Here, insofar as neither the third-party nor proposed amended third-party complaint assert that Blank Rome, LLP's liability is solely statutory and not based upon its own negligence, they fail to state a cause of action for common law indemnification. Blank Rome also fails to state a cause of action for contractual indemnification since "[a] party is entitled to full contractual indemnification provided that the intention to indemnify can be clearly implied from the language and purposes of the entire agreement and the surrounding facts and circumstances" (Drzewinski v Atlantic Scaffold & Ladder Co., 70 NY2d 774, 777 [1987] [internal quotation marks omitted]; Masciotta v Morse Diesel Intl., Inc., 303 AD2d 309, 310 [2003]). Here, neither the third-party nor the proposed amended third-party complaint identifies any agreement, let alone alleges that BMF ever agreed to indemnify Blank Rome, LLP for any legal malpractice committed in the course of its representation of the defendant.

 

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Account Stated and Legal Malpractice

The principal of account stated, "an agreement between parties to an account based upon prior transactions between them with respect to the correctness of the account items and the balance due. By retaining billing statements and failing to object to the account within a reasonable time,  the recipient of the bill implies that he or she agrees with the sender regarding the amount owed."  is a powerful, and often determinative Issue.  In Brunelle & Hadjikow, P.C. v O'Callaghan 2013 NY Slip Op 31302(U) June 17, 2013  Sup Ct, NY County Docket Number: 158213/2012 Judge: Shirley Werner Kornreich it is the decisive and only factor considered.

"There is no doubt that B&H is entitled to an account stated on all amounts included in the June 7 Bill. O'Callaghan's written acknowledgment that he owed those amounts precludes his current objections as to how they were calculated, such as his qualms about rate increases. As for  O'Callaghan's objections to the amounts billed after June 7, 2006, which were made for the first time in his December 27,2006 letter, he is precluded from objecting to virtually all of the amounts billed because his objections were not made within 30 days of the relevant monthly invoices (except for his objections to invoices sent after November 27,2006). Nonetheless, even if he were entitled to challenge all of the invoices sent after the June 7 Bill, his objections would still fail. First, his objection to the rate increases, provided for in the Retainer, occurred long after such increases went into effect and were billed. Second, his objection to being overcharged for the NYSE appeal fails because the invoices clearly evidence the credits that lowered the appeal billings to $75,000. His self-serving contention about B&H billing him more than $75,000 for work on the appeal (they purportedly billed it as work for his other NYSE proceedings) is refuted by the invoices and is  insufficient to defeat summary judgment."

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It Happens Even HEre

We remember some Shakespeare quote about how Caesar's wife must be more worthy than any other politician/emperor's wife. Similarly, here a legal malpractice case is dismissed for failure to file a complaint after a demand had been made. In Dayan v Darche 2012 NY Slip Op 04312 Appellate Division, Second Department the Court writes:
 

"To avoid dismissal of the action for failure to serve a complaint after a demand for the complaint has been made pursuant to CPLR 3012(b), a plaintiff must demonstrate both a reasonable excuse for the delay in serving the complaint and a potentially meritorious cause of action (see Perez-Faringer v Heilman, 79 AD3d 837, 838; Gibbons v Court Officers' Benevolent Assn. of Nassau County, 78 AD3d 654, 654; Pristavec v Galligan, 32 AD3d 834, 834; Maldonado v Suffolk County, 23 AD3d 353, 353-354). Here, the plaintiff failed to proffer any excuse for her lengthy delay in serving the complaint. Furthermore, she failed to establish that she had a potentially meritorious cause of action (see generally Rosner v Paley, 65 NY2d 736, 738; Allen v Potruch, 282 AD2d 484, 484-485; Iannacone v Weidman, 273 AD2d 275, 276-277; Rubinberg v Walker, 252 AD2d 466, 467). Accordingly, the Supreme Court properly granted the defendant's motion to dismiss the action.

In addition, the plaintiff's motion for leave to renew her opposition to the defendant's motion to dismiss the action was properly denied. In support of her motion, the plaintiff proffered her attorney's affirmation in an attempt to provide a reasonable excuse for the delay in serving the complaint. However, the attorney's affirmation, which, inter alia, proffered an unsubstantiated excuse of disabling illnesses, was insufficient to warrant a change of the prior determination (see CPLR 2221[e][2]; Cynan Sheetmetal Prods., Inc. v B.R. Fries & Assoc., Inc., 83 AD3d 645, 646; Mattera v Capric, 54 AD3d 827, 828; Borgia v Interboro Gen. Hosp., 90 AD2d 531, affd 59 NY2d 802; Wolfe v Town of Hempstead, Dept. of Parks & Recreation, 75 AD2d 811, 812). Moreover, the plaintiff failed to offer a reasonable justification for failing to present this affirmation in opposition [*2]to the defendant's original motion (see CPLR 2221[e][3]; Brown Bark I, L.P. v Imperial Dev. & Constr. Corp., 65 AD3d 510, 512; Zarecki & Assoc., LLC v Ross, 50 AD3d 679, 680; Reshevsky v United Water N.Y., Inc., 46 AD3d 532, 533). "


 

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An Unfixable Mistake and Legal Malpractice

Immigration law legal malpractice cases are relatively rare.  One reason is that the plaintiff is usually not int he US and a second reason is that damages are somewhat difficult to calculate, in these days of purely economic or "out-of-pocket" damages.  Here is an unusual case.  Delgado v Bretz & Coven, LLP   2013 NY Slip Op 04720   Decided on June 20, 2013   Appellate Division, First Department   Manzanet-Daniels, J., J.  
 

"In this case we determine whether plaintiff has sufficiently alleged that defendants' legal advice concerning the consequences of applying for an adjustment of immigration status constitutes malpractice, and whether she has sufficiently alleged that such misguided advice was the but-for cause of her ultimately being taken into custody and deported. [*2]

Plaintiff is a native of Ecuador. On May 5, 1999, she first attempted to enter the United States at Houston International Airport by falsely presenting herself as a returning resident alien, using a visa belonging to her cousin, who has the same surname. Plaintiff was removed and returned to Ecuador, but in December 2000, reentered the United States without inspection by crossing the Mexican border. As an alien previously ordered removed who thereafter entered the United States without permission, plaintiff was deemed "inadmissible" pursuant to Immigration and Nationality Act (INA) § 212(a)(9)(C)(i)(II) (8 USC § 1182[a][9][C][i][II]), and, by statute, could not apply for readmission until ten years had passed from the date of her last departure from the United States (INA § 212(a)(9)(C)(ii) (8 USC § 1182[a][9][C][ii]).

On January 8, 2006, plaintiff married a United States citizen, Jarret Kahn. On February 23, 2006, plaintiff retained defendant Bretz & Coven LLP to represent her before the United States Citizenship and Immigration Service (CIS) in order to obtain legal residency in the United States. Plaintiff alleges that defendant Kerry Bretz, a partner at the firm, determined that she could apply for adjustment of status without leaving the United States, based on a Ninth Circuit precedent, Perez-Gonzalez v Ashcroft (379 F3d 783, 788-789 [9th Cir 2004]).

On July 11, 2006, the firm filed several immigration forms with CIS, including a Form I-485 petition for adjustment of status to lawful permanent resident, Form I-212 for permission to reapply after deportation or removal, and a Form I-130 petition for classification of an alien as an immediate relative of a United States citizen.

On October 26, 2006, plaintiff and her husband appeared with defendants for an interview at CIS, which denied her requests on the I-485 and I-212 forms that same day. CIS found her ineligible for adjustment of her status because she had entered the United States without permission after having been removed. CIS found that plaintiff did not qualify for a waiver of inadmissibility, as set forth in section (a)(9)(C)(ii) because 10 years had not yet passed from the date of her last departure from the United States, and she did not seek permission for readmission before she reentered in December 2000.

Plaintiff was arrested on the same day by immigration authorities, who reinstated her expedited removal order of May 5, 1999. They released her from detention the same day pursuant to an agreement reached with her lawyers, but the reinstatement order remained in effect. "

"We now modify to reinstate plaintiff's claim for legal malpractice against defendant law firm and Bretz. The claim against defendant Guadagno was properly dismissed. Inasmuch as the well-reasoned and thorough Second Circuit opinion was not contingent on defendant Guadagno's argument or briefing, it was not a but-for cause of plaintiff's deportation.

We disagree with the motion court's conclusion that due to intervening events, defendant law firm and Bretz's malpractice was not a "but for" cause of plaintiff's removal from the United States. Plaintiff was unambiguously ineligible for relief under prevailing case law when defendants submitted her application to immigration authorities. Once her application was submitted and denied and the removal order reinstated, any efforts by Kahn, whom plaintiff had retained to represent her after terminating defendants' services, were too late to remedy the situation. By that point, the only intervening event sufficient to break the causal chain would have been a change in the relevant immigration law. The passage of four years between plaintiff's consultation with defendants and her removal did not disrupt the chain of causation.

When defendants submitted plaintiff's application, the government had already publicly announced that it would not grant relief to those in her position in light of the BIA's decision in Matter of Torres-Garcia (see e.g. CIS Interoffice Memo dated Mar. 31, 2006, p. 2, attached to the complaint and available at http://www.uscis.gov/USCIS/Laws/Memoranda/Static_Files_Memoranda/Archives%201998-2008/2006/perezgonz033106.pdf, stating that in light of Torres-Garcia, "in any case where an alien is inadmissible under section 212(a)(9)(C)(i) of the INA and 10 years have not elapsed since the date of the alien's last departure from the United States, USCIS should deny any Form I-212 requesting consent to reapply for admission"). However, instead of advising plaintiff concerning the clear implications of the BIA's ruling in Torres-Garcia — to which the Ninth Circuit owed deference under Chevron USA — defendants assured plaintiff "she would not be deported much less detained" if she applied.

Given plaintiff's allegations that she had no chance of obtaining immigration relief and that defendants failed to thoroughly discuss the possibility, if not certainty, of reinstatement of the order of deportation and removal upon submission of the application, plaintiff has sufficiently alleged that defendants followed an unreasonable course of action in pursuing the application (see Phoenix Erectors, LLC v Fogarty, 90 AD3d 468, 469 [1st Dept 2011]). Moreover, she has sufficiently alleged proximate cause, because the submission of the application alerted authorities to her status, which led to the issuance of the reinstatement order and ultimately to her removal (see Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442 [2007]; Phoenix Erectors, 90 AD3d at 469). Plaintiff's unlawful status alone did not trigger her removal, since she had resided in the United States, albeit unlawfully, for more than six years; she was removed only after defendants affirmatively alerted immigration authorities to her presence. The record does not indicate on this motion pursuant to CPLR 3211 that plaintiff would have otherwise come to the attention of the immigration authorities. Without discovery on the issue, it cannot yet be said, as defendants assert, that plaintiff would have been deported regardless of defendants' malpractice. Indeed, had plaintiff waited four more years she would have been eligible to apply for reinstatement under INA § 212(a)(9)(C)(ii), which provides that an alien in [*5]plaintiff's position can apply for admission if more than ten years have passed from the date of the alien's last departure from the United States."

 

 

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Proximate Cause in the Biggest Cases of Professional Malpractice

Yesterday we took a look at RGH Liquidating Trust v Deloitte & Touche LLP  2013 NY Slip Op 31224(U)  June 6, 2013 Sup Ct, New York County  Docket Number: 600057/06  Judge: Eileen Bransten on the issue of standing.  Today, we'll look at the proximate cause issue.  Just to remind you, this billion dollar professional malpractice case involves some of the following parties: According to the Amended Complaint, the Banks included Chemical Bank, Bank of
America of Illinois, Bank of New York, Bankers Trust Company, Credit Lyonnais New York
Branch, Credit Lyonnais Caymen Islands Branch, National Westminster Bank USA, Bank of
Montreal, Corestates Bank, N.A., Union Bank, ABN AMRO Bank N.V., New York Branch,
Sanwa Bank California, Banque Paribas, New York Branch, The Yasuda Trust and Banking Co.,
Ltd., and PNC Bank, National Association.

One of the more interesting parts of the professional malpractice world is the deep (really deep) plunge the court is willing to take in looking at the underlying case.  It's no exception in this case

"Defendants argue that their reports did not proximately cause Plaintiff s loss, since there is no evidence that the Banks would have taken any of the actions alleged in the pleading but for Defendants' alleged misrepresentations. These actions include: (1) exercising their rights under the Credit Agreement to declare the loans due and payable and terminate all loan commitments to Reliance Financial Services; (2) refusing to extend the loans from March 31,2000 to August 31, 2000; (3) selling the collateral that secured the loans; (4) recommending that Reliance sell its Financial Products Division and its Excess and Surplus Lines Division, to generate funds to repay the loans; and, (5) contacting Reliance's independent audit committee and/or state insurance regulators. (Am. Compi. ~~ 44-47.) Each of these allegations is discussed below.
 

1. Declaring the Loans Due and Terminating RFS Loan Commitments


Plaintiff alleges that, had the Banks known that the financial reports were overstated, they would have exercised their rights under the Credit Agreement to declare the loans due and payable on the original maturity date of March 31, 2000, terminating all loan commitments to Reliance Financial Services. However, Defendants submit the Banks' testimony, stating that they never called due their loans even after discovering Reliance's true financial condition. (Affirmation of Michael 1. Dell ("Dell Affirm."), Ex. 13 at 29, 67; Ex. 14 at 129; Ex. 15 at 110-111; Ex. 16 at 17; Ex. 17 at 96-97; Plaintiffs Rule 19-a Response ~ 91.) In February 2000, RFS informed the Banks that it could not repay the loans, and Reliance sought a five-month extension for repayment. Thereafter,
the Banks agreed to extend the maturity date of the loans from March 31,2000 to August 31,2000, because failing to do so would have caused a downgrade in Reliance's ratings, making it difficult for Reliance to write new insurance and repay the loans. (Dell Affirm., Ex. 6 at 32-33,48-50,56-57,87; Ex. 7 at 21,30-33,55-57; Ex. 9 at 40,47; Ex. 10 at 0054; Ex. 11 at 4024; Ex. 18 at 23-24; Ex. 19 at 398,404; Ex. 20 at 5929-5930; Ex. 21 at 3258.) The Banks' testimony, internal memoranda, and credit extension applications all indicate that the Banks "[did] not have any viable alternative" other than to agree tto RFS's extension request."

The Banks also did not call due their loans in August 2000, when Reliance announced that: it was increasing loss reserves by $460 million~ it could not repay the loans~ it was further downgraded to "B"; it was unable to write new business and operating in a run-off mode; the sale of Reliance to Leucadia National Corporation fell through in July of 2000; and it was considering a bankruptcy filing. (Dell Affirm. Ex. 6 at 73-74, 78, 89-90, 95; Ex. 7 at 80, 83; Ex. 13 at 29-30, 53-54; Ex. 14 at 88-90; Ex. 29 at 3366-3367; Ex. 31 at 0365; Ex. 43 at 2; Ex. 44 at 0065.) Instead, the Banks agreed to
waive Reliance's default under the Credit Agreement and to further extend the loan maturity date to November 10, 2000. The Banks acknowledged the possibility that regulators could place Reliance in rehabilitation or liquidation, and that the "regulators are likely to prohibit the upstreaming of any normal dividends, i.e., from the insurance subsidiaries to our Borrower [RFS]." Id., Ex. 29 at 3367; Ex. 13 at 54-55. The Banks testified that, in August 2000, Reliance was not operating as a going
concern, but rather, was operating in a run-off/liquidation mode. "

"Like the plaintiff in Starr Foundation, the Banks "remained in possession of the rue value of the [loans], whatever that value may have been at any given time," and any decline in the value of the loans or RFS's ability to repay them was caused by RIC's massive losses, which "would have been incurred regardless of any earlier misrepresentation [defendants] made concerning [RIC's loss reserves]." Starr Found., 76 A.D.3d at 28-29 ("the paper 'loss' the [plaintiff] seeks to recover in this action was caused by the underlying business decision of [defendant's] management to build up the CDS portfolio on which the losses reported in early 2008 were sustained, not by the earlier alleged misrepresentations forming the basis of the [plaintiffs] complaint"). For the foregoing reasons, Defendants have made a prima facie showing that the Banks would not have called due their loans, and that even if they did, the Pennsylvania Insurance Department would not have permitted RIC to make any payments to RFS, thereby preventing RFS from repaying the loans.
 

 

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Even the Biggest Plaintiffs Must Show Proximate Cause

It's shocking to look at the list of banks which made an unsuccessful claim for professional malpractice in RGH Liquidating Trust v Deloitte & Touche LLP  2013 NY Slip Op 31224(U)
June 6, 2013  Sup Ct, New York County  Docket Number: 600057/06  Judge: Eileen Bransten and to realize that they were unable to recoup about a Billion (that's 1000 Million) dollars in lost loans, all of which they allege were caused by accounting malpractice.  Today, we'll look at the first of two issues:  standing.

In legal and professional malpractice plaintiff must have a relationship with the attorney.  Primarily this is to keep losing litigants from suing their opponent's lawyers.  Here, based upon Delaware law, it plays out somewhat differently, in the stockholder/corporation model.

"This action is based upon Defendants' allegedly improper performance of actuarial and accounting services for Reliance Group Holdings, Inc. ("Reliance Group Holdings" or "RGH"), Reliance Financial Services Corp. ("Reliance Financial Services" or "RFS"), and Reliance Insurance Company ('~RIC") (together, "Reliance"). Plaintiff RGH Liquidating Trust commenced this action, asserting fraud claims on behalf of the general unsecured creditors of RGH and RFS, including: a syndicate of 15 banks that collectively loaned RFS $237.5 million (Banks");! the Pension Benefit Guaranty Corporation (HPBGC"); and two former employees of RGH and RFS, David Woodward ("Woodward") and Christine Howard ("Howard").

Plaintiff s fraud claims are based upon financial reports prepared by Defendants for the year ending December 31, 1999, including Deloitte's audit and financial statements, issued on May 30, 2000, and Lommele's statement of actuarial opinion, issued on February 25,2000. Plaintiff claims that these financial reports overstated Reliance's surplus by $500 million and under reported its loss reserves by $500 million, resulting in a total misrepresentation of $1 billion. These misstatements allegedly caused Reliance to make improper distributions, incur additional liabilities, and forestall regulatory action.

It is undisputed that Reliance's financial condition was deteriorating by the end of 1999, prior to the issuance of Defendants' reports. RGH suffered an operating loss of $318.3 million in 1999, and, in February 2000, announced that it was suspending quarterly dividends and extending the maturity of its bank loans. In May 2000, RGH reported a $36.5 million operating loss for the first quarter 0[2000. By June 2000, RIC stopped underwriting property and casualty insurance. In July, a deal for an outside company to acquire RGH collapsed, and various ratings agencies downgraded Reliance's rating. By December 2000, RGH's stock traded at less than $1.00 per share, and the New York Stock Exchange suspended trading of RGH's securities.

Defendants seek summary judgment dismissing the Amended Complaint, arguing that Plaintiff lacks standing and that the claims are barred by res judicata. On the merits, Defendants argue that Plaintiffs fraud claims should be dismissed for failure to establish proximate cause and reasonable reliance.

Defendants argue that the Banks lack standing, because any injury to the Banks is derivative of harm to Reliance Financial Services ("RFS"), the entity to which the Banks made their loans. Defendants argue that the Pension Benefit Guaranty Corporation ("PBGC"), Woodward, and Howard lack standing for the same reason, incorporating by reference the standing arguments contained in the Banks' opening brief.

Under Delaware law, in order to determine whether Plaintiffs claims are derivative or individual, the
court should look to the nature of the wrong and to whom the relief should go. The stockholder's claimed direct injury must be independent of any alleged injury to the corporation. The
stockholder must demonstrate that the duty breached was owed to the stockholder and that he or she can prevail without showing an injury to the corporation. Tooley v. Donaldson, Lufkin, & Jenrette, Inc., 845 A.2d 1031, 1039 (Del. 2004). The court must consider "(1) who suffered the alleged harm (the corporation or the suing stockholders, individually); and (2) who would receive the benefit of any recovery or other remedy (the corporation or the stockholders, individually)." Id. at 1033; Yudell v. Gilbert,, 99 A.D.3d 108, 114 (1st Dep't 2012) (adopting the Tooley test for distinguishing between direct and derivative claims). "[T]he direct/derivative distinction [does] not vary because the claim was asserted by a creditor instead of a stockholder." North Am. Catholic Educ. Programming Found., Inc. v. Gheewalla, 2006 WL 2588971, * 11 n.lOO,2006 Del. Ch. LEXIS 164, *50 n.100 (Del. Ch. 2006), aff'd 930 A.2d 92 (Del. 2007).

As stated by the Court of Appeals, the Liquidating Trust "is the successor of RGH," and "the assets of RGH's bankruptcy estate vested in the Trust," including the "claims of the bankruptcy estate's creditors, who are the beneficiaries of any recoveries from [defendants]." RGH Liquidating Trust, 17 N.Y.3d at 407. In short, the creditor claims were assigned to RGH. RGH, in turn, assigned those claims to Plaintiff, and Plaintiff now asserts them directly. Thus, there are no derivative claims, and Defendants fail to make a prima facie showing that Plaintiff lacks standing. Condren, Walker & Co.,
Inc. v. Portnoy, 48 A.D.3d 331,331 (1st Dep't 2008) ("[a]n assignee stands in the shoes of its assignor, subject to all the equities and burdens attached to the property acquired"). "

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Is It Legal Malpractice to Withdraw As Attorney?

Money disputes between clients and attorneys are a rich source of litigation.  This is likely due to the low entry costs for attorneys to sue their clients, and the fact that clients are really relegated to the closed purse method of dealing with uncooperative attorneys.  Hence the stage is set for a large body of law on the issue.

In Brady v Freidlander  2013 NY Slip Op 31238(U)  June 7, 2013  Sup Ct, NY County  Docket Number: 156825/2012,   Judge Eileen A. Rakower takes on several of the most pressing questions.  Is it permissible to threaten to leave if not paid, is it legal malpractice to get out of the case, and is it a violation of Judiciary Law 487 to tell the court that you want to quit because of differences in strategy when there is a fee dispute too?

"As alleged in the Complaint, on September 1 0, 2009, represented by Defendant, Plaintiffs were  ready to proceed to trial in the Civil Court matters, but the matter was adjourned until September 30,2009. Defendant moved to be relieved as Plaintiffs' counsel. On September 30,2009, Defendant's motion was heard before the Honorable Debra Rose Samuels, Plaintiffs opposed, and the Court granted Defendant's motion. The Complaint alleges that "Defendant intentionally and maliciously misrepresented to the Plaintiffs and to the Court that he was withdrawing
from the representation of plaintiffs because of conflicts involving trial strategy when in fact the defendant's sole concern [was] that his future legal bills would not be paid."

""An attorney with just cause may withdraw from a case and may recover for his services rendered." In the Matter o/the ME. v. s.G., 124 Misc. 2d 851,851 (N.Y. County 1984). Furthermore, "An attorney may be permitted to withdrawn from employment where a client refuses to pay reasonable legal fees." Weiss v. Spitzer, 46 A.D. 3d 675 [2d Dept 1987]). It is well established that an attorney's alleged threat to cease representing a client unless the attorney is paid does not constitute duress. See Levitt v. Brooks, 102 A.D. 3d 547 [1 SI Dept 2013] (a lawyer's threat to cease rendering services unless paid does not constitute coercion); Duane Morris LLP v. Astor Holdings, Inc., 61 A.D. 3d 418 [1 st Dept 2009]; Fred Ehrlich, P. C. v. Tullo, 274 A.D. 2d 303 [1 st Dept 2000]
("[P]laintiff's 'threats' to cease representing defendants unless he were paid were not wrongful. The threatened exercise of a legal right is not economic duress.")"

"Plaintiffs allege that Defendant deceived the Court when he moved in open court to withdraw as their counsel on the basis that plaintiff James Brady questioned strategy and lacked trust in Defendant's representation "when in fact the real reason for withdrawal was the Defendant's concern that Plaintiffs could or would not pay defendant's future legal bills." However, Plaintiffs had the opportunity to raise these issues when opposing Defendant's motion to be relieved of counsel, and after considering Plaintiff's opposition, Judge Samuels permitted Defendant to be relieved
of counsel. Plaintiffs did not thereafter appeal Judge Samuels' decision on that point. Furthermore, even if Plaintiffs' allegations are true and Defendant was seeking to withdraw based on Plaintiffs' failure to pay legal fees, an attorney may be permitted to seek withdrawal on this ground. Thus, the conclusion that Defendant acted "with intent to deceive the court or any party" is without factual support. "

"The Complaint fails to allege facts sufficient to show that "but for" Defendant's negligence,  Plaintiffs would have prevailed in the underlying action. Here, while the Complaint states that
"Plaintiff would have won the trial in the Civil Court based on defendants of Constructive Eviction and breach of warranty ... had the defendant not abandoned representation and provided adequate advice concerning the surrender of the possession issue of the Yellowstone injunction ... and Plaintiffs would not have lost their [commercial spaces]", these allegations are conclusory and without factual support. Rather, based on the Complaint, after Defendant was relieved of counsel,
Plaintiffs were provided with time to obtain new counsel, and the default entered against the corporate plaintiffs was based on their failure to do so, and that default has now been reversed.
Plaintiffs' fourth cause of action alleges misrepresentation. The Complaint alleges that "Defendant intentionally and maliciously misrepresented to the Plaintiffs and to the Court that he was withdrawing from the representation of plaintiffs because of conflicts involving trial strategy when in fact the defendant's sole concern [was] that his future legal bills would not be paid." Here, in light of the fact that Defendant moved in open court to be relieved as counsel, Plaintiffs opposed, Judge Samuels' granted Defendant's motion, and Plaintiffs' did not appeal that order on that issue, the
issue was previously litigated and cannot be relitigated here. "

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Something Was Wrong, But It's Too Late

Uninsured Motorist's Coverage is insurance that one buys for the instance in which the other driver is uninsured or underinsured.  Before that coverage, which has already been paid for, is triggered, several things must take place.  One is that the entire policy payout of the other driver must be obtained and the second is that your carrier must consent to the settlement.  What happens if one of the two conditions precedent doesn't happen? 

We see one such situation in Benjamin v Allstate Ins. Co., 2013 NY Slip Op 31248(U) June 10, 2013 Supreme Court, Suffolk County Docket Number: 11-37345 Judge: W. Gerard Asher. 

"This action was commenced to recover damages allegedly sustained by the plaintiff as the result
of the actions of the defendants The Odierno Law Firm, PC and Joseph J. Odierno (Odierno) in failing to timely pay her the proceeds of the settlement of a personal injury action commenced on her behalf, failing to timely notify her of its failure to timely notify her insurance carrier of the potential of her potential “SUM” claim, and for their violation of Judiciary Law 487. The amended complaint in this action sets forth three causes of action. The first cause of action against the defendant Allstate Insurance Company (Allstate) seeks a declaration that she is entitled to supplementary underinsured motorist (SUM) benefits pursuant to her policy of insurance with Allstate. The second and third causes of action against Odierno sound in legal malpractice and violations of Judiciary Law 5 487."

"It is undisputed that plaintiff was involved in a motor vehicle accident on May 7,2004, and that
Odierno was retained by the plaintiff to prosecute an action against both the owner and the operator of the other vehicle (the underlying action). It is also undisputed that Odierno settled the underlying action on or about May 17, 2007. A review of the documentary evidence reveals that Odierno received the settlement check from the defendants’ insurance carrier on or about June 26,2007, and that he filed a closing statement pursuant to 22 NYCRR 691.20 on or about September 14,2007. However, Odierno did not disburse the amount due to his client immediately. Instead, he paid out $6,000 to the plaintiff on March I I, 2008, and the balance due her on October 18, 2008."

"To the extent that the plaintiffs second cause of action can be read to assert that Odierno’s delay
in paying out the subject settlement proceeds to the plaintiff constituted legal malpractice, the action accrued no later than October 18, 2008. In a letter that date, Odierno transmitted the balance of the settlement proceeds to the plaintiff stating “Thank you for the privilege of selecting my office to represent you in this matter. If I can be of service to you in the future, do not hesitate to contact me.” An action to recover damages for legal malpractice must be commenced within three years from accrual (CPLR 214 (6); see McCoy v Feinman, 99 NY2d 295,755 N.Y.S.2d 693 [2002]; Rupolo v Fish, 87 AD3d 684,928 NYS2d 596 [2d Dept 201 13; Williams v Lindenberg, 24 AD3d 434,805 NYS2d 132 [2d Dept 20051). A legal malpractice claim accrues when the malpractice is committed, not when it is discovered (McCoy v Feinman, supra; Shumsky v Eisenstein, 96 NY2d 164,726 NYS2d 365 [2001]; St. Stephens Baptist Church, Inc. v Salzman, 37 AD3d 589, 830 NYS2d 248 [2d Dept 20071; Shivers v. Siegel, 11 AD3d 447,782 NYS2d 752 [2d Dept 20041; Venturella-Ferretti v Kinzler, 306 AD2d 465, 762 NYS2d 254 [2d Dept 20031). In addition, a client’s ignorance of the alleged wrong or injury has no impact upon when the cause of action accrues (see McCoy v Feinman, supra; Alicanti v Bianco, 2 AD3d 373,767 NYS2d 815 [2d Dept 20031; King v Albany County Pub. Defender’s OfJ:2,55 AD2d 770, 680 NYS2d 289 [3d Dept 19981). Here, Odierno has established that this action was commenced on December 7,2011, more than three years after the second cause of action accrued on September 14, 2007 or, in any event, no later than October 18,2008.’"

Question:  How does plaintiff prove that it was negligence to settle for $ 21,500 rather than $ 25,000 and that the other driver would have paid $ 25,000 if the attorney were not negligent?

 

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Lessons From a Medical Malpractice Case

Two lessons for legal malpractice practitioners and, upon consideration, for all attorneys can be found in Wild v Catholic Health Says. 2013 NY Slip Op 04043   Decided on June 6, 2013  Court of Appeals.  The first lesson is straightforward.  One must preserve objections in order to appeal from the resulting order.  Here,  "On appeal, defendants contend that the trial court improperly instructed the jury on the loss-of-chance theory of liability because New York State has not yet adopted this theory, and the charge relaxed the plaintiffs' burden of proof [FAN1]. Defendants base their argument on the following jury charge language:
"The negligence of any of the defendants may be considered a cause of the injuries to [decedent] if you find the defendant[s'] actions or omissions deprived [decedent] of a substantial possibility of avoiding the consequences of having a permanent feeding tube. The chance of avoiding a need for a permanent feeding tube to be substantial, does not have to be more likely than not and it does not have to be more than 50 percent, but it has to be more than slight." [*3]
 

In response, plaintiffs argue that defendants' challenge based on the viability of a loss-of-chance theory of liability under New York law is unreserved, and that regardless, the jury charge was proper.

As a threshold matter we agree that the defendants' challenge to the viability of the loss-of-chance theory as articulated on appeal is unreserved. The record indicates that defendants did not present the trial court with a direct challenge to the underlying theory of negligence propounded during the trial and eventually charged to the jury. Instead, counsel challenged the jury charge on the ground that the "facts of this case" do not support a loss-of-chance charge, not that such charge is wholly unavailable under New York law. Thus, the concern raised with the trial court was that plaintiffs had failed to present a factual basis for the charge, not that as a legal matter, regardless of the evidence, such a charge was prohibited under New York law. Moreover, defendants' challenge was asserted as part of counsel's request for adherence to the PI because, counsel argued, the proposed language deviated from the PI in a way that changed the burden of proof. Thus, the sum and substance of defendants' argument before the trial judge was that plaintiff failed to present evidence in support of the charge which sought to instruct the jury on a negligence theory of loss-of-chance, and that the jury charge erroneously reduced the plaintiffs' burden of proof and relaxed the standard for causation."

The Second lesson is on the question of whether a "loss-of-chance" claim might be available for legal malpractice cases.  "The loss-of-chance theory, in certain jurisdictions, "'grant[s] recovery to patients for deprivation of the opportunity of more beneficial treatment and the resulting gain in life expectancy or comfort, although the evidence fails to establish a reasonable probability that without defendant's negligence a cure was achievable'" (Hill v Novelties Pharmaceuticals Corp. _ F Supp 2d _ [ED NY 2013], quoting Williams v Recall, 33 Cal App4Th 120, 134 [1995]). "

Might not the same theory, that a plaintiff was deprived of the opportunity of a more beneficial outcome to the litigation be available to legal malpractice cases?

 

 



 

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A Son in Jail, New York Parents and a Legal Malpractice Case

On occasion, the bitterness and melancholy aspects of a case are cognizable merely from reading a motion decision.  In Bloomgarden v Lanza  2013 NY Slip Op 31221(U)  June 5, 2013
Supr Ct, Suffolk County  Docket Number: 8587-12  Judge: Daniel Martin  two parents, both doctors, sue California attorneys over representation of their son, convicted of crimes and facing death penalty proceedings in California.  Is there jurisdiction over the attorneys in NY? 

The short answer is no.  The longer answer is found in an analysis of the NY long-arm jurisdiction law.  "Plaintiffs commenced this action seeking to recover damages for legal malpractice [any other claims] which allegedly resulted from the defendants' representation of plaintiffs and their son, Howard Bloomgarden, in a suit against another attorney in the State of Florida relating to her retention by the plaintiffs to handle two matters relating to Howard Bloomgarden's plea/conviction on various criminal counts and the return of fees paid.  The Florida action, under the title: BLOOMGARDEN v. ROBERTA MANDEL, et al, sought to recover from the attorney for breach of contract [and other claims], all concerning Ms. Mandel's efforts to relieve Howard Bloomgarden of the consequences of a federal criminal court plea allocution, based on lack of effective counsel by yet another attorney, for which he was, and is, serving 33 and 3/4 years sentence and upon which he potentially would fact two capital murder prosecutions in the State of California."

After a long [and not reproducible discussion] of the NY  long arm statute , CPLR 302, the court decides that there is insufficient nexus to New York.  In fact, other than the residence of the plaintiffs, and the fact that a contract was mailed into NY, there is no connection at all. Supreme Court decides that it is without personal jurisdiction over the defendants, and dismisses.

 

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Legal Malpractice and the Insurance Carrier's Obligations

This clearly written Court of Appeals case lays out the Insurance carrier's obligation to defend legal malpractice cases, and what happens when they refuse to defend.  K2 Inv. Group, LLC v American Guar. & Liab. Ins. Co. ,2013 NY Slip Op 04270 , Decided on June 11, 2013  Court of Appeals, Smith, J. tells us that when the carrier wrongfully fails to defend, it cannot then litigate other policy exclusions, and can (but not in this case) be responsible for bad faith amounts in excess of the policy.
 

"We affirm the summary judgment in plaintiffs' favor on the breach of contract claims without reaching the question that divided the Appellate Division: the applicability of the insured's status exclusion and the business enterprise exclusion to American Guarantee's duty to indemnify Daniels for a judgment based on legal malpractice. We hold that, by breaching its duty to defend Daniels, American Guarantee lost its right to rely on these exclusions in litigation over its indemnity obligation.

It is quite clear that American Guarantee breached its duty to defend — indeed, it does not seem to contend otherwise now. We summarized the law applicable to this issue in Automobile Ins. Co. of Hartford v Cook (7 NY3d 131, 137 [2006]):

"It is well settled that an insurance company's duty to defend is broader than its duty to indemnify. Indeed, the duty to defend is exceedingly broad and an insurer will be called upon to provide a defense whenever the allegations of the complaint suggest a reasonable possibility of coverage. If, liberally construed, the claim is within the embrace of the policy, the insurer must come forward to defend its insured no matter how groundless, [*4]false or baseless the suit may be.
"The duty remains even though facts outside the four corners of the pleadings indicate that the claim may be meritless or not covered . . . . Thus, an insurer may be required to defend under the contract even though it may not be required to pay once the litigation has run its course.""
 

"Here, the complaint in the underlying lawsuit against Daniels unmistakably pleads a claim for legal malpractice. American Guarantee no doubt had reason to be skeptical of the claim; it is unusual, in a loan transaction, for lenders to retain a principal of the borrower to act as their lawyer, as plaintiffs here claimed they did. But that means only that the claim against Daniels may have been "groundless, false or baseless . . . meritless or not covered" — it does not allow American Guarantee to escape its duty to defend. It would be different if the claim were collusive, but American Guarantee has neither claimed that plaintiffs and Daniels were colluding against it nor alleged any facts to support such a claim.

It is also well established that, when an insurer has breached its duty to defend and is called upon to indemnify its insured for a judgment entered against it, the insurer may not assert in its defense grounds that would have defeated the underlying claim against the insured (Lang v Hanover Ins. Co., 3 NY3d 350, 356 [2004]). As the court said in Mendoza v Schlossman (87 AD2d 606, 607 [2d Dept 1982]):

"A default judgment on the issue of liability in a legal malpractice action disposes of the issue of the lawyer's negligence and the validity of the underlying claim."
The rule as we have just stated it does not dispose of the present case, because American Guarantee is not relying on defenses that would have shielded Daniels from malpractice liability; it is relying on exclusions in its insurance contract with Daniels. In Lang, however, we stated the rule more broadly:

"[A]n insurance company that disclaims in a situation where coverage may be arguable is well advised to seek a declaratory judgment concerning the duty to defend or indemnify the purported insured. If it disclaims and declines to defend in the underlying [*5]lawsuit without doing so, it takes the risk that the injured party will obtain a judgment against the purported insured and then seek payment . . . Under those circumstances, having chosen not to participate in the underlying lawsuit, the insurance carrier may litigate only the validity of its disclaimer and cannot challenge the liability or damages determination underlying the judgment."

 

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Legal Malpractice and the Adult Use Industry

The Adult Use industry was the subject of constitutional litigation in the City of New York, and was essentially limited to certain non-residential corridors.  In DeWitt, New Yorkits use is also limited.  What happens when an operator hires a law firm to help set up an adult use industry, and finds that the warehouse and buildings cannot be used for that purpose?

Hotaling v Sprock  2013 NY Slip Op 04170  Released on June 7, 2013  Appellate Division, Fourth Department  is just such a situation.  "Plaintiff commenced this legal malpractice action seeking damages for the alleged negligence of defendants in failing to determine that a Town of Dewitt zoning ordinance prohibited him from operating an "adult use" business in the building he purchased for that purpose. Zonen, Ltd. (Zonen), the corporation formed by plaintiff to operate the business, has operated a retail establishment in the building, which includes "adult use" inventory, since 2001. Supreme Court granted defendants' motion for summary judgment dismissing the third amended complaint on the ground that plaintiff failed to raise an issue of fact whether he sustained actual and ascertainable damages, an
" essential element[] of [a] legal malpractice cause of action' " (Malachowski v Daly, 87 AD3d 1321, 1321; see generally Dombrowski v Bulson, 19 NY3d 347, 350). "

"Nevertheless, viewing the submissions of the parties in the light most favorable to plaintiff, as we must (see Victor Temporary Servs. v Slattery, 105 AD2d 1115, 1117), we conclude that the court erred in determining that plaintiff failed to raise an issue of fact whether he has sustained damages for loss of rent (cf. Malachowski, 87 AD3d at 1323). We therefore modify the judgment accordingly. Plaintiff alleges in the third amended complaint, as amplified by his response to defendants' interrogatories, that he is unable to lease a portion of the property to Zonen or any other entity because defendants failed to advise him of zoning ordinances governing parking restrictions. Plaintiff also averred in his affidavit in opposition to the motion that his efforts to lease the warehouse were prohibited by the Town of Dewitt inasmuch as the property lacks the required number of parking spaces. Moreover, in response to defendants' interrogatories, plaintiff submitted documentary evidence establishing that he has been damaged by the loss of rent for 2,500 feet at a rate of $3.50 per square foot. "


 

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A Judiciary Law 487 Claim Clears its First Hurdle

From what we can decipher in this decision, an insured car owner was convinced that it had to pay $200,000 from its personal assets in settlement of a case, and that the insurance company was allowed not to pay.  Plaintiff alleges that this happened because of deceit. 

In Duszynski v Allstate Ins. Co.   2013 NY Slip Op 04172   Released on June 7, 2013  Appellate Division, Fourth Department plaintiff moves to amend the complaint. 
 

"James Lambert (Lambert) struck a pedestrian while operating a vehicle owned by his mother, Ruby Lambert (decedent). The pedestrian commenced a personal injury action against decedent and Lambert, both of whom were insured by defendant Allstate Insurance Company (Allstate). Defendants Paul E. Richardson and The Law Offices of Mary A. Bjork (Bjork) were assigned by Allstate to defend decedent and Lambert in the personal injury action. As part of the settlement of that action, decedent agreed to pay approximately $200,000 from her personal assets. Before that payment could be made, however, decedent passed away. Pursuant to an order of Surrogate's Court, decedent's estate paid that amount to the personal injury plaintiff in full and final settlement of the action as against decedent.

Plaintiff, as administratrix of decedent's estate, thereafter commenced the instant action alleging, inter alia, that Richardson and Bjork were negligent and committed legal malpractice while handling the defense of the personal injury action. Sixteen months later, plaintiff moved for leave to amend the complaint to add a cause of action under Judiciary Law § 487. Supreme Court granted that motion, and we now affirm. "

""A violation of Judiciary Law § 487 may be established either by the defendant's alleged deceit or by an alleged chronic, extreme pattern of legal delinquency by the defendant" (Scarborough v Napoli, Kaiser & Bern, LLP, 63 AD3d 1531, 1533 [internal quotation marks omitted]; cf. Donaldson v Bottar, 275 AD2d 897, 898, lv dismissed 95 NY2d 959; see generally Amalfitano v Rosenberg, 12 NY3d 8, 12-14). With respect to the element of deceit, "[t]he operative language at issue— guilty of any deceit'—focuses on the attorney's intent to deceive, not the deceit's success" (Amalfitano, 12 NY3d at 14). Here, in addition to alleging that Richardson "intentionally deceived . . . Lambert when Richardson falsely stated to . . . Lambert that [the personal injury plaintiff] was intent on settling the matter for the combined policy limits," plaintiff alleges that "Bjork/Richardson intentionally deceived [decedent] and . . . Lambert in representing to them that the [personal injury action] had been settled within policy limits and that neither [Lambert's] nor [decedent's] personal assets would be exposed." Inasmuch as plaintiff alleges that the attorneys "engaged in intentional deceit" (Scarborough, 63 AD3d at 1533), we conclude that plaintiff has alleged sufficient facts to state a cause of action under Judiciary Law § 487.

Defendants further contend that plaintiff's motion should have been denied inasmuch as no damages resulted from the alleged misconduct. In her proposed amended complaint, plaintiff alleges that, as a result of defendants' violation of section 487, decedent was damaged. On this record, we cannot conclude that plaintiff's allegation of damages is patently lacking in merit (cf. Manna v Ades, 237 AD2d 264, 265, lv denied 90 NY2d 806; Michalic v Klat, 128 AD2d 505, 506). In any event, " the decision whether to grant leave to amend a complaint is committed to the sound discretion of the court' " (Carro v Lyons Falls Pulp & Papers, Inc., 56 AD3d 1276, 1277), and we see no basis to disturb the court's decision here. "

 

 

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What is Effectively Compelled and What is Speculation?

Client retains attorney, and reaches settlement of an underlying workers' compensation case.  He later sues attorney for legal malpractice.  May he?

The short answer is yes, a client may sue his attorney after a settlement, if "'if it is alleged that [the] settlement . . . was effectively compelled by the mistakes of counsel'" (Tortura v Sullivan Papain Block McGrath & Cannavo, P.C., 21 AD3d 1082, 1083 [2005], lv denied 6 NY3d 701 [2005].

The longer answer is seen in Marchell v Littman 2013 NY Slip Op 04068  Decided on June 6, 2013  Appellate Division, Third Department.   "Even assuming that defendant was negligent because he was unfamiliar with the Board's apportionment doctrine (see e.g. Matter of Nye v IBM Corp., 2 AD3d 1164, 1164 [2003]; Matter of Krebs v Town of Ithaca, 293 AD2d 883, 883-884 [2002], lv denied 100 NY2d 501 [2003]), he could nevertheless succeed on his motion for summary judgment by demonstrating that his negligence was not a proximate cause of any actual and ascertainable damages to plaintiff (see Geraci v Munnelly, 85 AD3d 1361, 1362 [2011]; Bixby v Somerville, 62 AD3d 1137, 1139 [2009]; Tabner v Drake, 9 AD3d 606, 609 [2004]). In the context of the compromise reached in settlement of plaintiff's workers' compensation claim, a legal malpractice cause of action would be viable "'if it is alleged that [the] settlement . . . was effectively compelled by the mistakes of counsel'" (Tortura v Sullivan Papain Block McGrath & Cannavo, P.C., 21 AD3d 1082, 1083 [2005], lv denied 6 NY3d 701 [2005], quoting Bernstein v Oppenheim & Co., 160 AD2d 428, 430 [1990]; see Rau v Borenkoff, 262 AD2d 388, 389 [1999]).

Here, SIF's representative testified that, even with apportionment, he felt that he had given "too much" to plaintiff and that the negotiations had resulted in a "bad deal" for SIF. He also testified that an agreement that failed to include apportionment would have been "the ultimate victory for [plaintiff]." In short, there is no evidence to support plaintiff's contention that the carrier would have agreed to the settlement without apportioning the claim. Rather, the record supports the contrary conclusion that it was to SIF's advantage to seek a settlement that apportioned its liability.

Nor is there any evidence that defendant could have litigated a more favorable result for plaintiff (see Sevey v Friedlander, 83 AD3d 1226, 1227 [2011], lv denied 17 NY3d 707 [2011]; Mega Group, Inc. v Pechenik & Curro, P.C., 32 AD3d 584, 586-587 [2006]). In determining whether plaintiff was entitled to continued benefits, the Board would have been confronted with differing medical opinions and would have been free to credit the opinion that plaintiff was no longer disabled as a result of the work-related injury (see e.g. Matter of Altobelli v Allinger Temporary Servs., Inc., 70 AD3d 1083, 1084 [2010]; Matter of Moore v St. Peter's Hosp., 18 AD3d 1001, 1002 [2005]). Had the Board accepted the opinion of plaintiff's treating orthopedist, plaintiff would have been entitled only to a lump-sum payment for his work-related injury, and would not be receiving the continuing benefits provided by the settlement.

We cannot agree with plaintiff's argument, based on Matter of Sidaris v Brookhaven Mem. Hosp. (271 AD2d 884 [2000]), that he would have been entitled to continuing benefits after a hearing even if the treating orthopedist's opinion was accepted. The claimant in Sidaris received benefits based on an accident that aggravated his preexisting condition (id. at 884). Here, plaintiff's treating orthopedist opined that his work-related injury was fully resolved and had no impact on his preexisting condition, which he described as naturally progressing. Accordingly, the damages alleged by plaintiff are speculative and Supreme Court properly granted defendant's motion for summary judgment dismissing the complaint (see Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 443 [2007]; Sevey v Friedlander, 83 AD3d at 1227; Country Club Partners, LLC v Goldman, 79 AD3d 1389, 1392 [2010]). "

 

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What's A Trial Strategy and What's Not ?

Judgment calls are exempt from legal malpractice consideration.  Put another way, an attorney may not be held for legal malpractice on the basis of a reasonable trial strategy even when unsuccessful.  But, what is a trial strategy a