New York Attorney Malpractice Blog

This short news article is probably wrong on several counts of its report, but the story itself is compelling.  Client goes to a personal injury attorney Frank "The Strong Arm" Azar  with a car accident case and then the case is settled for $ 25,000.  Did he do a good enough job?  Must he "strong arm" the opponent to avoid legal malpractice?  The client successfully sued for $ 145,000.

"The lawsuit was brought by 40-year-old Shawna Jimenez of Colorado Springs, who says she was injured in a car crash in 2004. She says she was pressured take a settlement of $25,000. El Paso County jurors acquitted Azar's firm and one of his attorneys of theft and false advertising but found them guilty of negligence and misrepresentation. Azar says he will appeal."

In this article from Law.Com a question in Texas mirrors similar issues in California, Nevada and Ohio.  In the recent past there have been surveys, bar association meetings, proposed legislation and other indicia of interest in either mandatory legal malpractice insurance or required insurance disclosure to clients.  As of now, no rippling in New York on the question of whether an attorney has legal malpractice insurance, and no easy-practical way of finding out short of starting a law suit.

"While Texas lawyers aren't keen on having a rule that would require them to disclose whether they carry legal malpractice insurance, the public favors such a requirement, recent surveys conducted by the State Bar of Texas show.

In an early April telephone survey of 500 Texas residents, 70 percent of the respondents said lawyers should be required to inform potential clients whether the lawyers carry, or do not carry, professional liability insurance that could cover the costs of claims arising out of their law practice.

In contrast, only about 23 percent of the 6,160 attorneys who responded to the State Bar's online survey in February and 29 percent of the 500 attorneys contacted in a telephone survey in early April favored an insurance-disclosure rule. "

A 13-member task force appointed by State Bar President Gib Walton in the fall of 2007 is reviewing the survey results as well as data collected from other states that require lawyers to disclose their insurance status. David Beck, the task force's chairman, says he is hopeful the task force will vote on whether to recommend a disclosure rule during a May 21 meeting in Houston.

This report from the West Virginia Record is an eye-opener on politics and judicial elections.  The tip of the iceberg is an aside in which an attorney has been suspended for failing to disclose whether he has legal malpractice insurance.  The story is mulit-facited, however:

"MORGANTOWN - E-mails in state Supreme Court candidate Bob Bastress' West Virginia University College of Law account show he and others speculating on the race.

"As for the campaign, it has heated up," Bastress, a WVU law professor, wrote to a former colleague in a Feb. 8 e-mail. "The stuff on Spike (Chief Justice Maynard) has made it interesting, and the rumors are heavy (some from apparently knowledgeable sources) that a lot more is coming."

The exchange was with Emily Spieler, dean of the Northeastern University College of Law in Boston. She is a former WVU law professor. The subject line of the e-mail was "Dean search," and part of it was redacted by WVU.

The West Virginia Record had requested phone and fax records for Bastress since Nov. 1, and e-mail records since Nov. 1 of campaign-related correspondence.

The e-mails show that Bastress has talked to other WVU faculty members, students and others about helping on his campaign, had official campaign literature sent to his law school e-mail account, sought donations and communicated with the media about the election and discussed the campaign with current state Supreme Court Justice Larry Starcher. State law prohibits the use of public resources to run a political campaign.

Phone and fax records, according to WVU's FOIA reply, only are kept for long-distance calls and faxes. Bastress had no long-distance calls or faxes, according to WVU. Bastress also does not have a state-issued cell phone, WVU said.

"The feds have moved in, apparently," Bastress continued in his e-mail to Spieler. "I've also been informed another development is coming in the next week. We'll see. Spike could implode at any time, and he is certainly wounded enough already to have made a race of it. ...

"Responses are positive (which means next to nothing), but raising money continues to be a struggle."

Spieler replied asking about the other candidates.

"The other two candidates are Margaret Workman and Menis Ketchum," Bastress replied. "Menis, as you might recall, is a very successful trial lawyer in Huntington and will dump a lot of money into the campaign."

Spieler again replied.

"Bad news about Ketchum," she wrote. "Sorry."

Another exchange that was forwarded to Bastress was between filmmaker Wayne Ewing and Michael C. Farber, a Sutton attorney who currently is suspended for failure to pay dues and to disclose whether he carries malpractice insurance as well as an ethics violation. "

     Good cause for termination is not the same as malpractice. Attorney malpractice, the deviation from good and accepted practice, which proximately damaged the party, in which, but for the negligence of the attorney there would have been a different or better result is not the same as good cause for termination. Termination for cause has arisen in many situations in which malpractice was not even discussed, much less claimed. Substantial delays in prosecuting the case, failure timely to obtain medical records, failure to retain an employment [which] contravenes specific legal requirements is sufficient, abandonment of a case, a conflict of interest, a refusal personally to try a case, a failure to disclose a settlement offer, are all examples of misconduct which does not amount to malpractice.

The difference flows logically from the question of damages. In malpractice there is a positive claim for damages, over and above fee considerations from the attorneys; in the question of termination for cause, there can be but a reduction of the fees paid, but no positive claim for damages. As one might expect, the burden of proof for malpractice requires much more than the burden of proof to decide between "good cause" and "no cause."

Suri Katebi, Plaintiff-Appellant, v Paul Fink, et al., Defendants-Respondents.

SUPREME COURT OF NEW YORK,
APPELLATE DIVISION, FIRST DEPARTMENT

2008 NY Slip Op 4141
May 1, 2008, Decided
May 1, 2008, Entered

Clients are often asked at an allocution, settling a matrimonial action whether they are satisfied with their attorney’s work. It is highly questionable whether they, at that time, knew whether the work is satisfactory or not, but the practice goes on.

Here is a legal malpractice case, arising from a matrimonial action which, at least in part, depends on this practice.

“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, 554 N.Y.S.2d 487 [1990]), here, the complaint is contradicted by the evidentiary material submitted on the motion to dismiss (see Guggenheimer v Ginzburg, 43 NY2d 268, 275, 372 N.E.2d 17, 401 N.Y.S.2d 182 [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 [**2] the funds allegedly dissipated by him, and that she was satisfied with the services provided by her attorney.

We have considered plaintiff's remaining contentions and find them unavailing.

JOSEPH G. HUGAR AND LKC, LLC, PLAINTIFFS-APPELLANTS, v DAMON & MOREY LLP, CHRISTOPHER T. GREENE, ESQ., ANTHONY L. EUGENI, ESQ., AND ROBERT J. PORTIN, ESQ., DEFENDANTS-RESPONDENTS.

596 CA 07-02311

SUPREME COURT OF NEW YORK, APPELLATE DIVISION, FOURTH DEPARTMENT

2008 NY Slip Op 4167; 2008
May 2, 2008, Decided
May 2, 2008, Entered

When are attorneys treated the same as their clients? Here is an example of attorneys getting the benefit of the client’s release.

“Memorandum: Plaintiffs commenced this action seeking damages for breach of fiduciary duty and legal malpractice arising out of defendants' representation of plaintiffs and two other individuals and their respective limited liability companies in the formation of Aurora Healthcare LLC (Aurora). When Aurora terminated the employment of Joseph G. Hugar (plaintiff), defendants continued to represent Aurora and its remaining principals in negotiations with plaintiff to resolve his claims against Aurora and its two remaining principals and their respective limited [**2] liability companies. Plaintiff and his own limited liability company, plaintiff LKC, LLC, retained new counsel during the negotiations, and their claims were eventually resolved. Plaintiff then, on behalf of both plaintiffs, executed a settlement agreement that included a general release (Settlement Agreement). Defendants moved to dismiss the complaint pursuant to CPLR 3211 (a) (1), (5) and (7), contending that the action is barred by the covenants and general release in the Settlement Agreement. We conclude that Supreme Court properly granted the motion.

We agree with plaintiffs that the terms of the general release do not apply to defendants because they were not "Grantees and their respective successors and assigns," and those were the only parties encompassed by the general release. We conclude, however, that the complaint was properly dismissed because the action is barred by the covenant not to sue in the Settlement Agreement. Pursuant to that covenant, plaintiffs agreed not to institute any action at law or equity or to assert any claim against various entities relating to any "Company Matters." The term "various entities" includes "Company Affiliates," and the Settlement Agreement [**3] defines [*2] Company Affiliates as, inter alia, the parties to the agreement, as well as "all agents and employees thereof."

Legal malpractice has lately been examining securities transactions, bankruptcies and other phenomina of the downward trend in the economy.  Here, Law Com reports a new case against outside counsel for Brocade.

"Few plaintiffs have gone after companies' outside lawyers in backdating lawsuits. But a new derivative case against directors and officers at Brocade Communications Systems Inc. also targets the company's law firm, Wilson Sonsini Goodrich & Rosati. Filed April 18 in Northern District federal court by a small San Diego firm, Johnson Bottini, the suit accuses Wilson Sonsini of legal malpractice for allegedly blessing backdating at Brocade, a company that saw two of its former executives convicted of criminal charges.

In particular, the plaintiff alleges that the firm signed off on a part-time program for new Brocade hires that was really set up to grant stock options for the new employees at low points. The complaint also claims that Wilson Sonsini gave bad legal advice on a settlement proposal that didn't give enough to Brocade in another derivative case.

Although firm Chairman Larry Sonsini has been named in backdating suits in his role as a director, as in this case with Brocade, the firm hasn't (aside from a case brought by a pro se Rambus investor).

"The obvious reason that people don't sue them is because they're going to have a lot of cases with Wilson Sonsini in the future," said Francis Bottini Jr., the lead lawyer on the case. "But if there's a valid claim, it's our duty as lawyers to bring them for the company."

In the high-stakes Estates and Trust world of Suffolk County [think East Hampton, not Patchogue], this case was reported last week.  Plaintiff  John Randolph Hearst [of the publishing family] sued his attorney on the theory that he and his former wife "fraudulently deprived him of title and use of more than $ 20 million in real property." on a theory of undue influence. The case was decided by the Appellate Division, 2d Departmenbt.

The defendant attorney's CPLR 3211 motion was converted to a CPLR 3212 motion.  Plaintiff demonstrated that the defendant attorney represented both husband and wife, and was therefore burdened by a conflict of interest.  The AD determined that the case must be tried.

The law firm Clifford Chance was the latest participant in a swelling bankruptcy legal malpractice series of cases.  Anthony Lin of the NYLJ writes:

"Citing 'Stoneridge,' Judge Releases Law Firm From Securities Suit

A federal judge in Philadelphia has dropped Clifford Chance from a securities class action, citing the U.S. Supreme Court's recent decision in Stoneridge Investment Partners v. Scientific-Atlantic Inc. The London-based Clifford Chance firm had been facing suit by shareholders of DVI Inc., a health care finance company the law firm had represented in the months leading up to its 2003 bankruptcy filing. The shareholders had accused the firm of participating in a scheme with DVI's executives to engage in sham transactions designed to conceal the company's true financial health. In its January decision in the closely watched Stoneridge case, the Supreme Court rejected such "scheme liability" claims against third parties because the alleged schemes generally did not result in public statements on which investors could claim reliance. Applying this reasoning to the DVI class action, Judge Legrome Davis of the U.S. District Court for the District of Pennsylvania said: "Though Lead Plaintiffs allege that Clifford Chance knew of the scheme, and at times took a more active part in assisting DVI in the scheme, the fact remains that none of this alleged conduct was publicly disclosed such that it affected the market for DVI's securities." Though he declined to certify a class against Clifford Chance, the judge did allow the case to proceed against other defendants, including Merrill Lynch and Deloitte. The case is one of the first to cite Stoneridge, and Clifford Chance's lawyer, William J. Schwartz of Cooley Godward Kronish, said Judge Davis' decision would satisfy law firms that "hoped there would be meaning in the Supreme Court's decision." Clifford Chance continues to face a suit by DVI's bankruptcy trustee."

Frederick Rehberger, appellant,
v
Garguilo & Orzechowski, LLP, et al., respondents. (Index No. 30120/05)

2007-05158

SUPREME COURT OF NEW YORK, APPELLATE DIVISION, SECOND DEPARTMENT

2008 NY Slip Op 3187
April 8, 2008, Decided

“In an action to recover damages for legal malpractice, the plaintiff appeals, as limited by his brief, from so much of an order of the Supreme Court, Suffolk County (Kerins, J.), dated May 10, 2007, as granted the motion of the defendants Garguilo & Orzechowski, LLP, and Stanley E. Orzechowski to dismiss the complaint insofar as asserted against them pursuant to CPLR 3211(a)(5) as time-barred and that branch of the separate motion of the defendant Jerry Garguilo which was to dismiss the complaint insofar as asserted against him pursuant to CPLR 3211(a)(5) as time-barred.

In support of their respective motions pursuant to CPLR 3211(a)(5), each of the defendants demonstrated, prima facie, that the time in which to sue had expired and that the complaint was time-barred as against them (see McCoy v Feinman, 99 NY2d 295, 785 N.E.2d 714, 755 N.Y.S.2d 693; Sabadie v Burke, 47 AD3d 913, 849 N.Y.S.2d 440; Matter of Schwartz, 44 AD3d 779, 843 N.Y.S.2d 403; Savarese v Shatz, 273 AD2d 219, 708 N.Y.S.2d 642; CPLR 214[6]). However, in opposition, the plaintiff raised a triable issue of fact as to whether the statute of limitations was tolled by the [**3] continuous representation doctrine (see Town of Wallkill v Rosenstein, 40 AD3d 972, 837 N.Y.S.2d 212; Tropp v Lumer, 23 AD3d 550, 806 N.Y.S.2d 599; Savarese v Shatz, 273 AD2d 219, 708 N.Y.S.2d 642). Thus, the complaint should not have been dismissed as time-barred.”

William Jacobs, et al., Plaintiffs-Appellants, v Richard L. Kay, et al., Defendants-Respondents.
3460, 117332/05
SUPREME COURT OF NEW YORK, APPELLATE DIVISION, FIRST DEPARTMENT
2008 NY Slip Op 3710;
April 24, 2008, Decided
April 24, 2008, Entered

“After settling with the executrix their objections to the probate of their father's will and trust, plaintiffs commenced this action against the attorneys for alleged fraudulent misrepresentation, fraudulent concealment, legal malpractice, breach of contract and for treble damages, in the preparation of those instruments. Not only does HN1 New York not recognize a right of action for tortious interference with prospective inheritance (see Vogt v Witmeyer, 87 NY2d 998, 665 N.E.2d 189, 642 N.Y.S.2d 619 [1996]), but having earlier settled their objections, plaintiffs may not now seek, in effect, to challenge indirectly the validity of the will and trust by suing these defendants with whom they had absolutely no privity.

Absent a contractual relationship between the professional and the party claiming injury, the potential for liability "is carefully circumscribed" (William Iselin & Co. v Mann Judd Landau, 71 NY2d 420, 425, 522 N.E.2d 21, 527 N.Y.S.2d 176 [1988]). [**2] A viable tort claim against a professional requires that the underlying relationship between the parties be one of contract or the bond between them so close as to be the functional equivalent of contractual privity (Ossining Union Free School Dist. v Anderson LaRocca Anderson, 73 NY2d 417, 539 N.E.2d 91, 541 N.Y.S.2d 335 [1989]). However, plaintiffs have not pleaded any facts setting forth the existence of a contractual relationship or the functional equivalent thereof between themselves and defendants. Moreover, they have no viable cause of action for treble [*2] damages under Judiciary Law § 487, since defendants' purported deceit did not occur during the course of a pending judicial proceeding (see Costalas v Amalfitano, 305 AD2d 202, 203-204, 760 N.Y.S.2d 422 [2003].”

John Randolph Hearst, Jr., appellant, v Barbara Hearst, et al., respondents. (Index No. 06-01959)
SUPREME COURT OF NEW YORK, APPELLATE DIVISION, SECOND DEPARTMENT
2008 NY Slip Op 3590; 2008 N.Y. App. Div. LEXIS 3495
April 22, 2008, Decided

“The Supreme Court also improperly dismissed the cause of action alleging legal malpractice insofar as asserted against the Ackerman defendants. A prima facie case of legal malpractice requires proof that the attorney failed to exercise the ordinary and 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 [**10] damages (see Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442, 867 N.E.2d 385, 835 N.Y.S.2d 534; Bauza v Livington, 40 AD3d 791, 792-793, 836 N.Y.S.2d 645; Magnacoustics, Inc. v Ostrolenk, Faber, Gerb & Soffen, 303 AD2d 561, 562, 755 N.Y.S.2d 726). Here, the plaintiff alleges that Ackerman represented both Barbara and himself, and was thereby burdened by a conflict of interest, that Ackerman aided Barbara's misappropriation of his assets, and concealed these activities from him. Consequently, there are triable issues of fact with respect to the cause of action alleging legal malpractice (see Tabner v Drake, 9 AD3d 606, 610, 780 N.Y.S.2d 85), as well as the cause of action alleging the aiding and abetting of fraud, insofar as asserted against the Ackerman defendants.”

We can't read the case, and a subscription to the Minnesota lawyer site is required, but third-hand, here is an interesting take on a legal malpractice case from the Minnesota Lawyer Blog.

"Minnesota Lawyer has an interesting story this week about a local attorney who found himself being sued for malpractice in Kentucky by a woman who claimed that she was his client.  The woman was mulling filing a medical-malpractice suit against the decedent's health-care providers, and for reasons that are unclear contacted the Minnesota attorney. She filed out his retainer agreement and returned it, but the two had no further contact. The attorney officially declined the case in a letter sent several months later, shortly after the expiration of the applicable Kentucky statute of limitations on the estate's med-mal claim.

Minnesota Lawyer Blog's take on the case is puzzlement.  "In the meantime, you may want to be careful about whom you give a copy of your retainer agreement to ... "

A different take?  Attorney is retained to handle a medical malpractice case, and a written retainer is signed by the client.  Attorney holds onto the case until the statue of limitations has passed and then tells the client that he is not interested in the case.  Attorney may not have know of Kentucky's statute of limitations, but he has allowed the statute to pass.

It is rare to depose opposing counsel.  Here is an interesting case in which the question to be determined is whether plaintiff knew his union would not participate in a discrimination case, and if so, whether the statute of limitations had passed.

From Wilmer Cutler Pickering Hale and Dorr LLP :

"The Southern District of California ordered the deposition of Plaintiff’s attorney after finding that he had information crucial to Defendant’s statute of limitations defense, and that the information could not be otherwise obtained. Pastrana v. Local 9509 Commc’ns Workers of Am., No. 06cv1779 W (AJB), 2007 U.S. Dist. LEXIS 73219 (S.D. Cal. Sept. 28, 2007).

Plaintiff brought suit against Local 9509 after he was fired from his job with AT&T, and the union declined to appeal his grievance to arbitration. Id. at *3. Local 9509 raised the six-month statute of limitations as a defense to Plaintiff’s claim that it had breached its duty of fair representation. Thus the date by which the union notified Plaintiff and his attorney that it would not appeal was significant. Id. at *3-4.

If Plaintiff had been given notice by the union prior to February 28, 2006, his claim, brought on September 1, would be untimely. Id. at *4. Defendant claimed that a union employee had informed Plaintiff and his attorney via several teleconferences in February 2006 that it would not pursue his grievance to arbitration; Plaintiff disputed this account and offered a Declaration of his counsel that these teleconferences had not occurred until March 2006. Id. at *4. Defendant filed a motion to compel the deposition of Plaintiff’s counsel on the grounds that he was the only person besides Plaintiff and a union employee to participate in those conversations. Id. at *4-5. Defendant also moved to compel the production of any notes Plaintiff’s attorney took during those conversations. Plaintiff opposed the motion and moved for a protective order on the grounds that the testimony and documents sought were protected by the attorney-client privilege and work product doctrine. Id."

It's the very rare case in which an expert is not needed in a legal malpractice case.  Here is a SDNY case in which the expert was necessary.  How could this attorney not have used an expert on a motion for summary judgment?

YAMIRA SANTIELI, Plaintiff, v. LAWRENCE M. LAPINE, Defendant.
3:05cv1712(WWE)
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF CONNECTICUT
2008 U.S. Dist. LEXIS 28251
March 26, 2008, Decided

"To recover on a claim of legal malpractice, plaintiff must establish (1) the existence of an attorney-client relationship; (2) the attorney's wrongful act or omission; (3) causation; and (4) damages. Plaintiff must produce expert testimony that a breach of the professional standard of care has occurred, and that the breach was a proximate cause of the injuries suffered by the plaintiff. Dixon v. Bromson and Reiner, 95 Conn.App. 294, 297-98, 898 A.2d 193 (2006); Solomon v. Levett, 30 Conn.App. 125, 128, 618 A.2d 1389 (1993). In malpractice cases, expert testimony serves to assist lay people, such as members of the jury and [*4] the presiding judge, to understand the applicable standard of care and to evaluate the defendant's action in light of that standard. Vona v. Lerner, 72 Conn.App. 179, 187, 804 A.2d 1018 (2002).

Plaintiff makes no representation that she intends to disclose an expert witness and she has filed no motion to do so. Rather, she argues that this case falls within the exception to the expert witness requirement where there is "such an obvious and gross want of care or skill that the neglect is clear even to a layperson." Davis v. Margolis, 215 Conn. 408, 416 n. 6, 576 A.2d 489 (1990).

An expert may not be necessary when the legal malpractice involved a failure to follow rules of procedure, such as filing motions or attending hearings. See Dubreuil v. Witt, 80 Conn.App. 410, 422, 835 A.2d 477 (2003). However, the instant case does not involve an obvious and gross want of care that would be clear to a lay person. Here, assessment of whether defendant breached the standard of care requires expert testimony as to the division of marital assets and the advice provided by defendant. Accordingly, summary judgment is appropriate."

It appears certain that they gave bad tax shelter advice, but this plaintiff opted out of a successful class action only to see his own case dismissed,

EDWARD H. ARNOLD, Plaintiff, -against- KPMG LLP, and SIDLEY AUSTIN BROWN & WOOD LLP, Defendants.

05 Civ. 7349 (PAC)
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
2008 U.S. Dist. LEXIS 25855
March 28, 2008, Decided
March 28, 2008, Filed
Plaintiff Edward H. Arnold ("Arnold") brings this action against Defendants KPMG ("KPMG"), an accounting firm, and Sidley Austin Brown & Wood ("Brown & Wood"), a law firm, for damages allegedly suffered when he bought tax shelters from KPMG with Brown & Wood's endorsement. The tax shelters, which were effectuated through the purchase and sale of securities, were designed to offset Arnold's income but were determined to be unlawful tax-avoidance schemes.

The Court held oral argument on the matter on March 6, 2008. [*3] (Transcript of Oral Argument, March 6, 2008 ("Tr.").) The Court ruled that: (1) Arnold's federal securities claims are time-barred by operation of the relevant statute of limitations (Tr. at 7-11); and (2) Arnold's numerous state law claims merge into single claims for professional malpractice against each defendant (Tr. at 11-12). In light of these holdings, the Court heard oral argument as to: (1) whether the Court should exercise supplemental jurisdiction over the state law malpractice claims in light of the dismissal of the federal claims, and (2) whether the state law malpractice claims are time-barred under the statute of limitations. The Court now exercises its supplemental jurisdiction over the state law malpractice claims and dismisses them as time-barred.

In this case, Defendants argue that the three-year statute of limitations accrued when the opinion letters were issued. Arnold contends that because the fraudulent scheme was continuous, the claim did not accrue against either Defendant until KPMG revealed its fraudulent conduct by entering into a deferred prosecution agreement with the Department of Justice in August 2005. In the alternative, Arnold argues that the statute of limitations was tolled.

The Court rejects the argument that the appropriate date of accrual was August 2005; the claim for malpractice accrued when each Defendant issued its opinion letter.

In re D.A. ELIA CONSTRUCTION CORP., Plaintiff, v. DAMON & MOREY, LLP, Defendant.

07-CV-143A
UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF NEW YORK
2008 U.S. Dist. LEXIS 25496
March 31, 2008, Decided
March 31, 2008, Filed

“While the matter [the bankruptcy matter] was on appeal to the Second Circuit, Elia filed a complaint against Damon & Morey on February 14, 2007 in New York State Supreme Court asserting [*5] various state law causes of action relating to the firm's legal representation of Elia during the Chapter 11 proceeding. Specifically, the complaint alleges breach of a legal retainer agreement (first cause of action); legal malpractice (second cause of action); conversion (third cause of action) and attorney misconduct in violation of § 487 of the New York State Judiciary Law (fourth cause of action).”

“In Grausz v. Englander, 321 F.3d 467 (4th Cir. 2003), the Fourth Circuit addressed whether a legal malpractice claim brought after the entry of a final order approving fees under 11 U.S.C. § 330 was barred by the doctrine of res judicata. The Court held that it was because the "legal malpractice claim [was] rooted in the same cause of action as the earlier claim for [attorneys'] fees." Id. at 473. Likewise, the First and Fifth Circuits have also considered this issue and held that HN9 state law malpractice claims brought after the entry of a final order approving 11 U.S.C. § 330 fees are barred by the doctrine of res judicata. See In re Iannochino, 242 F.3d 36 (1st Cir. 2001); In re Intelogic Trace, Inc., 200 F.3d 382 (5th Cir. 2000); see also In re Robotic Vision Sys., Inc., 343 B.R. 393 (D.N.H. 2005); In re Blair, 319 B.R. 420 (D. Md. 2005) In so ruling, [*13] the Circuits considered whether the plaintiff knew or should have known about the basis of its malpractice claim at the time that attorneys fees were approved and whether the bankruptcy court provided an effective forum to litigate those claims. See Grausz, 321 F.3d at 473-74; In re Intelogic Trace, 200 F.3d at 388.

As in Grausz and Intelogic, all of the misconduct alleged to have been committed by Damon & Morey was known to Elia at the time that the bankruptcy court approved the final fee application. In fact, many of the same allegations made by Elia in its state law complaint were previously made by Elia in its objections to Damon & Morey's final fee application. Specifically, Elia argued to the bankruptcy court that the firm had labored under a conflict of interest, had committed legal malpractice and had failed to turn over money owed to the estate. The bankruptcy court provided Elia with ample opportunity raise those claims, but ultimately rejected them as meritless. Both this Court and the Second Circuit have expressly determined that the bankruptcy court gave adequate consideration to Elia's allegations of malpractice. See In re Elia, 04-cv 975, Dkt. No. 21 (this Court's order [*14] affirming bankruptcy court's award of § 330 fees and finding that bankruptcy court considered but rejected the malpractice allegations); and id. at Dkt. No. 33, at 3 and 4 (Second Circuit's Summary Order determining that the bankruptcy court gave Elia "more than ample opportunity to present its arguments" regarding its claims of "conflicted and negligent representation"). As such, it cannot be said that Elia was denied the opportunity to raise these claims in the prior action. 4”

ANDREW ORDON, Plaintiff-Appellant, -v.- KAREN L. KARPIE, and MURPHY & KARPIE, LLC Defendants-Appellees.

No. 06-3347-cv
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
2008 U.S. App. LEXIS 7626
April 10, 2008, Decided

“Ordon retained Karpie to represent him in proceedings before the Connecticut Medical Examining Board ("CMEB") after a patient reported to the Connecticut Department of Public Health ("CDPH") an adverse result in a surgery performed by plaintiff. Plaintiff alleges that Karpie advised him to settle the charges against him with the CDPH and accept a Consent Order and fine rather than proceed to a CMEB hearing, but that in doing so she negligently failed to inform him that he might be subject to disciplinary action by licensing authorities in other states pursuant to reciprocal discipline statutes. Plaintiff further alleges as consequences of the settlement that (1) his medical licenses in New York and California were subject to reciprocal disciplinary proceedings; (2) he was unable to obtain malpractice insurance and hospital accreditation for six months in California; (3) he lost income; (4) he suffered from depression; and (5) he became physically disabled as a result of stress-induced carpal tunnel syndrome.”

“Plaintiff's action fails under a theory of legal malpractice as well. HN3 "As a general rule, for a plaintiff to prevail in a legal malpractice case in Connecticut, he must present expert testimony to establish the standard of proper professional skill or care." Davis v. Margolis 215 Conn. 408, 416, 576 A.2d 489 (1990). In order to prevail, plaintiff must prove that but for defendant's alleged wrongful act--the recommendation that he settle with the CDPH--that he would have prevailed before the CMEB and there would not have been disciplinary action in New York and California. Plaintiff's only disclosed legal expert admitted that she had never represented a physician in disciplinary [*5] or medical malpractice actions and had "no way of knowing" whether plaintiff would have prevailed before the CMEB.”

Insurers who pay insureds for medical costs, or for damages sometimes seek the right to share in the proceeds of the insured's cases.  If an insured gets medical insurance coverage after an accident,] the insurance company would like to be reimbursed from the proceeds.

The right arises from the insurance contract, and sometimes by statute,  Other times, the insurance company asserts an equitable right to subrogation.  Here is a North Dakota case which illustrates the statutory variety.

IN THE SUPREME COURT
STATE OF NORTH DAKOTA
2008 ND 78
Robert N. Haugenoe, Claimant and Appellant
v.
Workforce Safety and Insurance, Appellee
and
Earl's Electric, Respondent

"Robert Haugenoe appeals from a district court judgment affirming an agency order granting Workforce Safety and Insurance ("WSI") a subrogation interest in a legal malpractice settlement. The legal malpractice action concerned Haugenoe's attorney's failure to properly prosecute a medical malpractice claim related to a physician's aggravation of a work-related injury suffered by Haugenoe. Haugenoe asserts that N.D.C.C. § 65-01-09, the subrogation provision of the workforce safety and insurance law, does not grant WSI a subrogation interest in the legal malpractice settlement. We agree. We hold that N.D.C.C. § 65-01-09 does not grant WSI a subrogation interest in an injured worker's legal malpractice claim against a third-party tortfeasor. We, therefore, reverse the order of WSI and the district court judgment. "

Hinshaw reports that the Minnesota Supreme Court has determined the rules for legal malpractice liability to third parties, in a business setting.  In New York, liability is generaly limited to situations in which the attorney issued an opinion letter relied upon by non-clients.  Here the rule is similar, and set forth:

"The court held that a party who is not an express client can sue a lawyer for legal malpractice in a business transaction from which the party expected to benefit only if the party was a direct and intended beneficiary of the lawyer's services or, in other words, if the benefit to that party is a central purpose of the transaction and the lawyer is aware of the client's intent to benefit that party. The court found no such evidence here.

The court also held that a party did not have an implied contractual attorney-client relationship with a lawyer unless the lawyer is aware of that party's identity, the party communicates with the lawyer and the lawyer is on notice that the lawyer is expected to represent that party. The court again found no such evidence here. "

The Daily News article relates the story of a penile implant patient whose  surgery went wrong.  He then went to a long island medical malpractice attorney who did not fil the case.  Plaintiff's attorney says that after the statute passed, the attorney wrote a letter saying: "After due reflectino, we are going to decline to accept your case into our office. "

Some combinations are simply counter-intuitive...ice cream and pickles, waffles and fried chicken, the US House of Representatives and legal malpractice.  Once explained, they are clear as a bell.  The South Carolina Appellate Blog explains how the US legislative body got involved in this legal malpractice case:

"In Spence v. Wingate, the South Carolina Court of Appeals granted a grant of partial summary judgment in a legal malpractice claim. At base, the trial court had held that the law firm did not owe a fiduciary duty to the wife concerning her late husband’s life insurance policy. The law firm represented the wife of the late Congressman Floyd W. Spence. The law firm originally undertook representation to negotiate an agreement on wife’s behalf with four sons of her husband regarding a division of the probate estate. During the course of the representation, the wife also consulted with the law firm about her husband’s federal life insurance policy and informed the law firm that Spence had named her as a beneficiary. The facts developed that shortly before his death Spence did attempt to change the beneficiary on his life insurance policy so the wife would be the sole beneficiary. Prior to this attempted change, Spence had named each of his four sons and the wife as equal beneficiaries. The United States House of Representatives determined that the proceeds should be divided equally among the wife and the four sons. "

Law Com reports that two former clients have sued Howrey LLP and its partner Michael S. Dowler over a failed deal to purchase a patent.  While normally this would not be of interest in a legal malpractice setting, the allegation is that the defendant demanded an 'under the radar" deal for 505 of the net profits, and then "breached his fiduciary duty by `misrepresenting the value of the patent.'"

Frederick Rehberger, appellant, v Garguilo & Orzechowski, LLP, et al., respondents.

(Index No. 30120/05)
2007-05158
SUPREME COURT OF NEW YORK, APPELLATE DIVISION, SECOND DEPARTMENT
2008 NY Slip Op 3187;
April 8, 2008, Decided

Plaintiff’s Suffolk County case dismissed on 3211(a)(5) grounds, and reversed upon adequate showing of continuous representation.

Milton B. Shapiro, etc., respondent, v Deborah Shapiro Kurtzman, appellant, et al., defendants. (Index No. 7875/01)

2007-01139, 2007-07057
SUPREME COURT OF NEW YORK, APPELLATE DIVISION, SECOND DEPARTMENT
2008 NY Slip Op 3194;
April 8, 2008, Decided

Borrower successfully moves to dismiss case against lender based on failure in discovery. Lender moves to vacate on the basis that its attorney retired from practice suffering from Alzheimer’s syndrome. Court vacates, but imposes a $ 10,000 sanction. Queery: how did the lender get its attorney’s medical/psychiatric records? Now did it present this info to the court? Why a big sanction?

One can read attorney discipline cases in the law journal every day.  Often they involve miscommunication with clients, neglect of cases and missing money.  This case is a standout, and must be read.  To begin, the players are all world class:  almost all the judges of the SDNY, a huge roster of local attorney players, the son of the US Attorney General, and big law firms.

Dorsey & Whitney and its attorney Kristan L. Peters were involved in litigation.  In Above the Law, we see:   "A Manhattan federal judge has delivered a lengthy manifesto against declining civility in the legal profession in the course of sanctioning law firm Dorsey & Whitney and two of its partners.
Southern District of New York Judge Harold Baer opened his 129-page decision with a discussion of how "naked competition and singular economic focus of the marketplace have begun to infiltrate the practice of law, subordinating the high standards of service, collegiality and professionalism as a result."

Now the discipline has moved one step further: "This matter comes before the Committee on Grievances for the Southern District of New York (the "Committee") to consider the imposition of discipline against respondent Kristan Peters based upon the proceedings (collectively, the "Wolters Kluwer proceedings") before the Hon. Harold Baer, United States District Judge, Southern District of New York, described in Judge Baer's opinions in Wolters Kluwer Financial Services, Inc. v. Scivantage, 2007 WL 1098714 (S.D.N.Y. Apr. 12, 2007)("Wolters Kluwer I"); Wolters Kluwer Financial Services, Inc. v. Scivantage, 2007 WL 1498114 (S.D.N.Y. May 23, 2007)("Wolters Kluwer II"); and Wolters Kluwer Financial Services, Inc. v. Scivantage, 525 F. Supp. 2d 448 (S.D.N.Y. 2007)("Wolters Kluwer III"). Full familiarity with these opinions is here assumed.

The decision goes on to say: "It was against this background that Ms. Peters gave the direction to a young associate that constitutes one of the charges against her. The lawyer in question, Jordan Brackett, was a first year associate at Dorsey working on the matter with Ms. Peters. When Mr. Brackett learned of the Court's April 24th email, he "immediately reviewed the transcripts in his office and realized that several of the transcripts he previously thought were 'work product' were in fact unmarked" and therefore should be delivered to the Court. 525 F. Supp. 2d at 518. He "called Ms. Peters and told her that he still had transcripts, some of which were unmarked." Id. Mr. Brackett had his copies of these transcripts delivered to Ms. Peters' office on April 25th. 525 F. Supp. 2d at 520.

The next day, on April 26th, Ms. Peters and Dorsey partner Jonathan Herman "discussed the issue of returning transcripts to the Court, and that some of [the] transcripts may have been work product." Id. at 521. Mr. Herman, and others at Dorsey, directed Ms. Peters to comply with the Court's order by delivering all of the transcripts to the Court. Id.; see also id. n.275. Ms. Peters challenged this direction. Mr. Herman told Ms. Peters to contact Dorsey's ethics specialist Bill Wernz or Dorsey's chief administrative partner Tom Tinkham. Ms. Peters did contact Tinkham and he told Herman that he gave Ms. Peters the same advice, i.e., to return the transcripts to the court. Id. n.275; see also, Tr. 9/12/2007 at 346:11-17, 347:15-18.

Ms. Peters then asked Mr. Brackett to return to her office so they could review the transcripts he had had delivered to her. 525 F. Supp. 2d at 521. Mr. Brackett testified that at this meeting Ms. Peters told him to mark up transcripts so that they would be work product and therefore could be withheld from the Court. According to Brackett:

I first showed [Ms. Peters] the transcripts that had some type of marking and which I thought were likely attorney work product. I then showed her the other transcripts and flipped through them to demonstrate that they had no markings. Ms. Peters then instructed me to write on the unmarked transcripts so that they would be considered attorney work product, and so that we would not have to return them to the Court. To the best of my recollection, Ms. Peters said something to the effect of 'scribble all over them.' Ms. Peters then told me that she would leave her office so that I could write all over the transcripts without her being present. To the best of my recollection, she said that she would leave for a few minutes either to powder her nose or to get something to drink. Ms. Peters then left the office. I was shocked by Ms. Peters' statement, but I understood that Ms. Peters was instructing me to do what she said and that she was not joking. "

We reported on this situation more than a year ago. Leeds Morelli & Brown apparently cut its own deal not to sue Prudential again, in exchange for a hefty legal fee paid to it.  One of its clients, Linda Guyden, is trying to set aside an arbitration award on the basis that her attorney was conflicted.  Here is the latest fromOverlawyered:

"The law firm of Leeds Morelli & Brown has recently been embroiled in controversy over episodes in which it has settled batches of employment discrimination claims while contemporaneously entering agreements in which the defendants agree to hire it (the Leeds Morelli firm) for substantial sums. Now an African-American woman who was once a vice president at Prudential Insurance and then sued the company for racial bias as a Leeds Morelli client "is asking a federal judge to set aside an arbitration award, alleging her lawyers were given improper financial inducement to keep her claim and hundreds of others out of court. According to Linda Guyden, the company paid $5 million to the law firm representing her and 358 other employees, in return for which Prudential's total exposure was capped at $10 million and the claims were kept secret."

Bankruptcy legal malpractice is again in the news.  As the economy cycles through bankruptcy issues, attorneys advising large corporations become targets for the trustees as well as the creditors.  Latest in the news is the Catholic Medical Center and McDermott, Will & Emery.

From Law.Com: "A bankruptcy trustee for Saint Vincent's Catholic Medical Centers of New York has sued McDermott, Will & Emery for legal malpractice, charging that partners at the Chicago-based law firm "put their personal relationships and selfish economic concerns above the interests of the charitable institution they were entrusted to protect."

The 75-page complaint, filed Monday in Manhattan Supreme Court by trustee Richard Gray, alleges McDermott Will put off a much-needed Chapter 11 filing to facilitate self-dealing by two other members of the hospital group's restructuring team. As a result of the delay, the trustee claims, Saint Vincent's incurred greater operating losses, paid more professional fees and took longer to emerge from bankruptcy after it finally did file.

The suit is requesting $1.2 billion in damages for legal malpractice, fraud and breach of fiduciary duty, among other claims, as well as disgorgement of $4.5 million in previously paid legal fees. In addition to the firm itself, partners William P. Smith, Stephen B. Selbst and David D. Cleary are individually named as defendants. "

This New Jersey real estate case makes little sense, unless you read it as envy transformed into litigation.  Plaintiff-seller decides to sell 6 lots for $ 2,000,000.  Everyone follows the contract of sale, which provided for interim payments, penalty payments, and no assignments.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION

MARIO ARGENZIANO and MARAGEN CORPORATION, Plaintiffs-Appellants, v. THOMAS YACCARINO, ATLANTIC GROUP REALTY, BY THE SEA REAL ESTATE, LLC, WILLIAM WEBBER, ANDREW BOECKEL, LIBERTY CIRCLE LLC, TROUTMAN PORT, LLC and JOSEPH MEEHAN,

In the meantime, buyer finds customers who are willing to pay $ 2.5 million for the 6 lots, and arranges to flip them at closing.  Plaintiff is paid its contract price, and when it finds out that buyer found a way to make a profit, sues.   The court found: "With respect to defendant Meehan, plaintiffs' claim was that the attorney breached a duty of care owed to plaintiffs by advising them to grant a six-month extension to buyers and thereby caused plaintiffs to lose an opportunity to retain the property and its appreciated value. Although plaintiffs produced an affidavit of merit, they did not provide an expert report or request an adjournment of the summary judgment motion to permit them to secure one. Thus, they did not have evidence to establish that the attorney breached a duty of care."

This case from New Jersey illustrates the difficult question of privity, which is another way to say, does plaintiff have a relationship with the attorney such that he may sue?

In SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION

CHARLES W. GEYER, on behalf of ONE WASHINGTON PARK URBAN RENEWAL
ASSOCIATES (OWPURA),  v. PITNEY, HARDIN, KIPP & SZUCH,  PETER A. FORGOSH, ESQ.,; JONATHAN S. BRISTOL, ESQ., JOEL ROSEN, ESQ., and DOUGLAS A. KENT, ESQ.,
we see the following:

"This legal malpractice action was dismissed by way of summary judgment. In these cross-appeals, we consider defendants' argument that plaintiff lacked standing to bring this suit, and plaintiff's argument that there was sufficient evidence of professional negligence and proximate cause to defeat summary judgment. Although we conclude that the trial judge erred in his view of the merits of some of plaintiff's claims, we direct that the bulk of the action be dismissed without prejudice because we agree plaintiff lacked standing to pursue all but one of his claims. And we also hold that the one claim defendant had standing to pursue was without merit and properly dismissed. "  For the play by play, see the entire case.

There are red flags all  over this case.  Ex-sheriff was jailed for corruption, sued the government attorney from his administration and did not present an expert.

" A judge in Newark yesterday threw out a legal malpractice suit brought by Thomas D'Alessio, former Essex County sheriff and county executive, against his administration's top lawyer.

Superior Court Judge Paul J. Vichness delivered his decision from the bench after D'Alessio's lawyer, Anthony Ambrosio, presented his case against Stephen J. Edelstein, who served as Essex County counsel from 1991-94.

Edelstein's lawyer, Dennis Drasco, had asked for the dismissal in legal arguments that lasted a couple of hours.

Drasco maintained D'Alessio, who wound up in federal prison for accepting bribes, had failed to establish there was any standard of professional conduct that Edelstein violated in handling D'Alessio's reopened divorce proceedings in the '90s.

He also noted that no legal experts took the stand in the trial that began last month to claim Edelstein departed from any such standard.

"Their proofs didn't meet the threshold," said Drasco, after the ruling..  Ex -sheriff  is plaintiff and was convicted and jailed for corruption.  He sues administration's attonrey.  He presents no expert."

From today's NYLJ:  "A New York judge has allowed a legal malpractice suit alleging faulty due diligence work by Paul, Hastings, Janofksy & Walker to proceed. Investor Ronald Katz hired the law firm to represent him in connection with a $3 million investment in a company called Humitech. In his suit, Mr. Katz claims the lawyers failed to determine that Humitech was not the beneficial owner of certain mineral rights he expected to obtain, and that other collateral in the form of stocks was encumbered. Paul Hastings had moved to dismiss the suit as time-barred, as the investment closed May 21, 2004, more than three years before Mr. Katz filed his suit. But Manhattan Supreme Court Justice Doris Ling-Cohan (See Profile) denied the firm's motion."

Evidence  before Supreme Court consisted of a bill for services after the closing.  The court determined that there was an open issue [unresolvable on a CPLR 3211 motion] of whether legal services continued.

Jusuf Becovic, et al., Plaintiffs-Respondents-Appellants, v Poisson & Hackett, et al., Defendants-Appellants-Respondents.

3142, 118056/04

SUPREME COURT OF NEW YORK, APPELLATE DIVISION, FIRST DEPARTMENT

2008 NY Slip Op 2644; 2008 N.Y. App. Div. LEXIS 2594

March 20, 2008, Decided
March 20, 2008, Entered

Plaintiffs were physically injured, and the placement and maintenance of a garage sign was an important element of the personal injury case. They lost and sued the attorneys. The legal malpractice case was dismissed on summary judgment. Note the parting comment on discovery.

“In this legal malpractice action, plaintiffs are unable to demonstrate that they would have succeeded in the underlying personal injury action "but for" defendants' conduct (see AmBase Corp. v Davis Polk & Wardwell, 8 NY3d 428, 434, 866 N.E.2d 1033, 834 N.Y.S.2d 705 [2007]). Contrary to the motion court's conclusion, plaintiffs cannot show that the defendants in the underlying action created the allegedly dangerous condition by an affirmative act of misfeasance (see Mercer v City of New York, 88 NY2d 955, 670 N.E.2d 443, 647 N.Y.S.2d 159 [1996]; Kelly v Berberich, 36 AD3d 475, 476-477, 828 N.Y.S.2d 332 [2007]), [**2] and the claim that said defendants failed to maintain the garage sign that was purportedly the instrumentality that resulted in the injury is not sufficient for this purpose. Plaintiffs also failed to raise an issue of fact regarding notice of the condition, since their sole opposition was hearsay (see Wertheimer v New York Prop. Ins. Underwriting Assn., 85 AD2d 540, 541, 444 N.Y.S.2d 668 [1981]). In view of the dismissal of the instant action, we need not address the arguments on plaintiffs' cross appeal for spoliation sanctions. We note, however, that plaintiffs' position is lacking given the long period of inaction [*2] by their attorneys in this action in failing to avail themselves of the opportunity to seek third-party discovery.”

Naida I. Velazquez, etc., appellant, v Bruno Decaudin, et al., defendants, Arnold Streisfeld, etc., et al., respondents. (Index No. 3191/06)

2006-10455, 2007-05614

SUPREME COURT OF NEW YORK, APPELLATE DIVISION, SECOND DEPARTMENT

2008 NY Slip Op 2575; 2008 N.Y. App. Div. LEXIS 2514

March 18, 2008, Decided

As the Appellate Division notes, this is a strange and disturbing real estate deal for the beneficiaries of their mother’s estate.

“The complaint alleges, insofar as is relevant here, that Jose, believing, on the basis of misrepresentations by certain of the defendants, that he was refinancing to save his mother's property from foreclosure, entered into a contract to convey the property to Decaudin for $ 390,000. The property allegedly was worth $ 600,000 at the time. When the closing was scheduled, Jose [**5] allegedly was advised that only he had to attend the closing, but that he should bring with him his mother's social security card and driver's license. At the closing he allegedly was introduced to Streisfeld, and was told that Streisfeld was his attorney.

[*3] The complaint alleges that, prior to the closing, Streisfeld had been provided with a copy of the power of attorney by which Jose was purporting to act in connection with the closing. The power of attorney, which had been executed by Jose's mother, appointed Jose and his sister, the plaintiff, Naida I. Velazquez, acting jointly, as attorneys-in-fact for their mother. Despite the requirement that Jose and the plaintiff act together, however, the complaint alleges that Jose acted alone in connection with the conveyance of the property and that the plaintiff was unaware of his actions in that regard.

According to the complaint, the closing proceeded only after a lengthy meeting, from which Jose was excluded, between Streisfeld, the representative of the defendant Old Town Abstract Company, LLC (hereinafter Old Town), which was the agent of UGT, and the mortgage brokers, financial advisors, and other attorneys involved in the transaction. [**6] When the closing did proceed, Jose was taken into a room separate from the other participants, where he was advised that he was required to execute a deed, as well as a use and occupancy agreement and an option to purchase agreement. The use and occupancy agreement provided that Jose, who resided elsewhere, could continue to reside in the premises for a period of 12 months as long as he paid Decaudin's mortgage payments in a timely fashion during that period. The option-to-purchase agreement provided that as long as he did not default in his obligations under the use and occupancy agreement, Jose could purchase the property during that year for $ 370,500, which was the total amount of the two mortgages that Decaudin executed in favor of the defendant Sunset Mortgage Company at the closing.

The complaint further alleges that, at the closing, Jose, Decaudin, Streisfeld, and the attorney for the lender executed an escrow agreement, pursuant to which no funds were to be disbursed, no documents were to be recorded, and no title insurance was to be issued until an original power of attorney in favor of Jose had been delivered to Old Town. The escrow agreement further provided that if the [**7] power of attorney were not delivered, the closing documents were to be returned to the respective parties. The complaint alleges that even though the power of attorney was never delivered to Old Town, the funds were disbursed and the closing documents were not returned, but were recorded, and UGT issued a policy of title insurance. The complaint alleges that the closing documents reflect that Decaudin paid approximately $ 295,000 to satisfy the outstanding mortgage indebtedness on the property and that the remaining $ 95,000 that had been borrowed from Sunset was disbursed to the defendants, rather than to the owner of the property, the plaintiff's decedent.

Several months later, Jose defaulted in his obligations under the use and occupancy agreement that was executed at closing and DeCaudin initiated a summary dispossess proceeding, in which he was represented by the defendants Ira S. Clair, an attorney, and Clair and Gjertsen (hereinafter collectively Clair). The proceeding resulted in the issuance of a judgment in favor of Decaudin and a warrant of eviction. The complaint alleges that in a motion to vacate the judgment and warrant, Clair was made aware of the alleged defect in Decaudin's [**8] title but negligently failed to examine the relevant documents or do anything else to ascertain the true state of Decaudin's title.”

John Napolitano, appellant, v Markotsis & Lieberman, et al., respondents. (Index No. 3514/05)

2007-04674

SUPREME COURT OF NEW YORK, APPELLATE DIVISION, SECOND DEPARTMENT

2008 NY Slip Op 2980; 2008 N.Y. App. Div. LEXIS 2951

Plaintiff loses summary judgment motion for a case in which defendant represented him at trial, ultimately losing plaintiff’s case on the defense of unclean hands. “On their motion for summary judgment, the defendants made a prima facie showing that the plaintiff would be unable to prove at trial that, but for their alleged malpractice, he would have overcome the affirmative defense of "unclean hands" and prevailed in the underlying action. In opposition, the plaintiff failed to raise a triable issue of fact. Accordingly, the Supreme Court [*2] properly granted the defendants' motion for summary judgment dismissing the complaint

John F. Sitar, et al., appellants, v Steven Sitar, et al., defendants, Kevin J. McGraw, et al., respondents. (Index No. 21538/05)

2007-00122

SUPREME COURT OF NEW YORK, APPELLATE DIVISION, SECOND DEPARTMENT

2008 NY Slip Op 2990; 2008 N.Y. App. Div. LEXIS 2964

April 1, 2008, Decided

In this sale of a business, plaintiffs alleged sufficient conflict of interest to keep the attorney in the case. “The owner agreed to sell the assets and operations of his company to his son's company. The attorney, who was a member of the company's board of directors, acted as attorney for both the owner and the owner's son in the transaction. Although the owner never received the books and records of the company, the sale took place. The owner claimed that the attorney was aware that his son and daughter-in-law had engaged in intentional and unauthorized behavior that had caused the value of the company to be diminished, but the attorney did not disclose that information to him. The appellate court found that the complaint adequately pleaded a cause of action alleging legal malpractice against the attorney and the law firm based on a conflict of interest and failure to disclose critical information concerning the purchase price of the company. The complaint also adequately pleaded a cause of action alleging breach of duty of loyalty and breach of duty of care against the attorney. The remaining causes of action were properly dismissed as duplicative or insufficient.

REENA KUMAR AND PRADEEP KUMAR, AS ASSIGNEES OF JEFFREY A. TISACK, PLAINTIFFS-RESPONDENTS, v AMERICAN TRANSIT INSURANCE COMPANY, DEFENDANT. AMERICAN TRANSIT INSURANCE COMPANY, THIRD-PARTY PLAINTIFF-APPELLANT, ROBERT E. GALLAGHER, JR., AND HISCOCK & BARCLAY, LLP, THIRD-PARTY DEFENDANTS-RESPONDENTS. JEFFREY A. TISACK, NONPARTY RESPONDENT.

1431 CA 07-01317

SUPREME COURT OF NEW YORK, APPELLATE DIVISION, FOURTH DEPARTMENT

2008 NY Slip Op 2674; 2008 N.Y. App. Div. LEXIS 2608

March 21, 2008, Decided
March 21, 2008, Entered

One of the bedrock principals of legal malpractice is the requirement of privity, Privity is the direct relationship between an attorney and client. Here is an interesting variation on the theme, in which an insurer is permitted to continue the action based upon equitable subrogation.

“Subrogation is the principle by which an insurer, having paid losses of its insured, is placed in the position of its insured so that it may recover from the third party legally responsible for the loss" (Winkelmann v Excelsior Ins. Co., 85 NY2d 577, 581, 650 N.E.2d 841, 626 N.Y.S.2d 994; see Teichman v Community Hosp. of W. Suffolk, 87 NY2d 514, 521, 663 N.E.2d 628, 640 N.Y.S.2d 472; Humbach v Goldstein, 229 AD2d 64, 66-67, 653 N.Y.S.2d 950, lv dismissed 91 NY2d 921, 692 N.E.2d 132, 669 N.Y.S.2d 263). We agree with American that, "[a]t this stage of the litigation, where there has been no disclosure held, the parties should not be foreclosed, particularly where, as here, the pleadings raise serious issues involving ethical considerations' " (Great Atl. Ins. Co. v Weinstein, 125 AD2d 214, 216, 509 N.Y.S.2d 325; see Allianz Underwriters Ins. Co., 13 AD3d at 174-175, 787 N.Y.S.2d 15). [**4] We reject the contention of the Hiscock attorneys that the principle of equitable subrogation does not apply because American has not yet paid the loss of its insured (see Allianz Underwriters Ins. Co. v Landmark Ins. Co., 13 AD3d 172, 175, 787 N.Y.S.2d 15; see also Krause v American Guar. & Liab. Ins. Co., 22 NY2d 147, 152-153, 239 N.E.2d 175, 292 N.Y.S.2d 67). Furthermore, unlike the complaint in Federal Ins. Co., the third-party complaint alleges that the loss sustained by American's insured resulted from the malpractice of the Hiscock attorneys, specifically their failure to appear and defend the insured. Viewing the complaint in the light most favorable to American and according American the benefit of every favorable inference, we therefore conclude that the complaint alleges sufficient facts to withstand the motion to dismiss, inasmuch as we deem it to state a cause of action for equitable subrogation (see generally Great Atl. Ins. Co., 125 AD2d at 215; cf. Federal Ins. Co., 47 AD3d at 62). Contrary to the dissent's conclusion, we need only determine that American has a cause of action, not whether it has stated one (see Leon, 84 NY2d at 88; Guggenheimer v Ginzburg, 43 NY2d 268, 275, 372 N.E.2d 17, 401 N.Y.S.2d 182).

Lisa A. Serradilla, et al., Plaintiffs-Respondents, v.Lords Corporation, et al., Defendants, Ronald Vargo, et al., Defendants-Appellants.

SUPREME COURT OF NEW YORK, APPELLATE DIVISION, FIRST DEPARTMENT

2008 NY Slip Op 3092; 2008 N.Y. App. Div. LEXIS 3037

April 8, 2008, Decided
April 8, 2008, Entered

This case involves plaintiffs who wanted to purchase a former SRO hotel and convert it to a single family home. They found out after closing that the City had issued vacate orders which prevented plaintiffs from doing the conversion. They successfully avoided dismissal against the architect and the attorney, but lost against the city. “Concerning the cause of action against the attorney for legal malpractice alleging, inter alia, his failure to advise plaintiffs of the need for a certificate of no harassment, the attorney failed to meet his initial burden of coming forward with evidence establishing, inter alia, that his only obligation to plaintiffs was to ensure that marketable title was transferred at closing and that the requisite standard of care did not require that he advise plaintiffs, prior to closing, of the need for a certificate of no harassment.”

Thomas E. Erdman, et al., respondents, v Joseph G. Dell, et al., appellants. (Index No. 11303/05)

SUPREME COURT OF NEW YORK, APPELLATE DIVISION, SECOND DEPARTMENT

2008 NY Slip Op 2959; 2008 N.Y. App. Div. LEXIS 2933

April 1, 2008, Decided

Plaintiffs obtained summary judgment against attorneys, which was reversed. However, the case goes on.

“The Supreme Court incorrectly [**2] found at this point in the action that the plaintiff Thomas E. Erdman would have succeeded on his cause of action to recover damages pursuant to Labor Law § 240(1) but for the defendants' failure to sue the general contractor before the statute of limitations expired. Issues of fact exist as to whether the scaffold from which Erdman fell provided proper protection and whether his failure to lock the wheels underneath the scaffold was the proximate cause of the accident”

Marc Edme, respondent, v Richard Tanenbaum, appellant, et al., defendants. (Index No. 29870/06)

2007-02921

SUPREME COURT OF NEW YORK, APPELLATE DIVISION, SECOND DEPARTMENT

2008 NY Slip Op 2956; 2008 N.Y. App. Div. LEXIS 2944

April 1, 2008, Decided

Plaintiffs and attorney defendant had an arrangement for sums of money to be put aside and used to pay monthly mortgage obligations. Something went wrong, and plaintiffs were in default on the mortgage.

Plaintiffs won the motion to dismiss, and the case continues. “Contrary to the contention of the defendant Richard Tanenbaum, the documentary evidence that he submitted in support of his motion did not conclusively refute the plaintiff's allegations of legal malpractice against him so as to warrant dismissal of the action pursuant to CPLR 3211(a)(1) insofar as asserted against him. Rather, those documents suggested that at least some of the funds at issue were supposed to be set aside to pay the plaintiff's [**2] monthly mortgage obligation, and Tanenbaum's evidence failed to address the plaintiff's allegations that he neglected to set up and maintain an escrow account for those funds, thereby facilitating the default on the mortgage

22 NYCRR 1215 is a section of the law that governs attorney fees and engagement letters or retainer agreements. Until recently, courts have had differeing interpretations of the penalty when an attorney seeks fees but has no retainer agreement or engagement letter.

The cases were decided in three different ways: the first allowed the attorrney fees determined in quantum meruit, the second was that the attorney could keep collected fees but no future fees, and the third was to allow no fees at all.

Along came the case of Rubenstein v. Ganea held:

"We find that a strict rule prohibiting the recovery of counsel fees for an attorney's noncompliance with 22 NYCRR 1215.1 is not appropriate and could create unfair windfalls for clients, particularly where clients know that the legal services they receive are not pro bono and where the failure to comply with the rule is not willful (see Matter of Feroleto, supra at 684). Our holding would be different were this matter a matrimonial action governed by the more stringent disciplinary requirements of 22 NYCRR 1400.3 and Code of Professional Responsibility DR 2-106 (c) (2). Here, Ganea concedes in her reply brief that "she did not think all legal services received would be free." Rubenstein's failure to comply with 22 NYCRR 1215.1 was unintentional, no doubt attributed to the promulgation of the rule only seven weeks prior to his retention. Accordingly, the{**41 AD3d at 64} Supreme Court correctly held that Rubenstein could seek recovery of attorneys' fees upon the theory of quantum meruit.[FN7]"

Now, the case of Mallin v. Nash in New York County adopts the Second Department's holding:

"Public policy dictates that courts pay particular attention to fee arrangements between attorneys and their clients, as it is important that a fee contract be fair, reasonable, and fully known and understood by the client (see Jacobson v Sassower, 66 NY2d 991, 993, 499 NYS2d 381, 489 NE2d 1283 [1985]; Shaw v Manufacturers Hanover Trust Co., 68 NY2d 172, 176, 507 NYS2d 610, 499 NE2d 864 [1986]; Matter of Bizar & Martin v U.S. Ice Cream Corp., 228 AD2d 588, 644 NYS2d 753 [2d Dept 1996]). If the terms of a retainer agreement are not established, or if a client discharges an attorney without cause, the attorney may recover only in quantum meruit to the extent that the fair and reasonable value of legal services can be established (see Matter of Cohen v Grainger, Tesoriero & Bell, 81 NY2d 655, 658, 602 NYS2d 788, 622 NE2d 288 [1983]; Campagnola v Mulholland, Minion & Roe, 76 NY2d 38, 43, 556 NYS2d 239, 555 NE2d 611 [1990]; Matter of Schanzer, 7 AD2d 275, 182 NYS2d 475 [1st Dept 1959], affd 8 NY2d 972, 204 NYS2d 349, 169 NE2d 11 [1960]).

In Mallin, the attorney was awarded no fees under quantum meruit.

Here, from Anthony Lin of the NYLJ is a story of Donald Trump suing Morrison Cohen for legal malpractice.  Admirably, the story does not use the tag line, "you're fired" anywhere.  Story:  Morrison Cohen represents Trump and a country club in a construction dispute and wins $ 2 million + along with attorney fees.  Now, Trump says he was churned. 

"In his malpractice suit, Trump maintains that Morrison Cohen should have advised against pursuing the infrastructure contract claims because it was foreseeable the legal costs incurred would far outstrip any recovery.

Trump said Monday the law firm was preoccupied with fees throughout the case.

"Ninety percent of the conversations I had with David Scharf were about legal fees, not the case," he said.

Trump also downplayed Scharf's contributions in the courtroom.

"We won the case because I'm a great witness," he said.

Scharf Tuesday said he stood by his work. It was necessary to address the infrastructure issues because they had been raised by the opposing side, he said. Scharf added that he was "disappointed and disheartened" to be in a collection dispute with Trump after the firm achieved "a great result." He said that Trump was aware from past representation of the firm's business model. "
 Stay tuned for the results, which will likely be publicised.  Read the story for the MC billing philosophy.

Continuing a trend in bankruptcy legal malpractice filings, here is the story, from NY Lawyer, of Pillsbury Winthrop Shaw Pittman and Levene, Neale, Bender, Rankin & Brill  all being asked to disgorge fees and expenses.in the amounts of $4.2 million $1.2 million.

"The filings ask for compensatory damages of at least $11 million from Pillsbury, former counsel for SonicBlue; $5 million from Levene, former counsel for the creditors' committee; and $14 million from the group of three creditors. The trustee also asks that the court consider punitive damages for Pillsbury and the creditors. "

In this Federal Case, Cobalt Multifamily Investors I, LLC v. Shapiro, 06 Civ. 6468, Decided March 28, 2008 ,District Judge Kimba M. Wood
U.S. DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK  

The Court ultimately determined that under the Wagoner rule trustee lacks standing, and that the bankruptcy trustee's powers are limited.

"The court-appointed receiver (the "Receiver") for Plaintiffs Cobalt Multifamily Investors I, LLC, and its related, defunct entities (collectively, the "Cobalt entities"), filed this lawsuit against three individuals alleged to have been the principals of the Cobalt entities, and three sets of attorneys who provided professional services to the Cobalt entities at various times during their active corporate lives. The three individuals named as defendants are Defendants Mark A. Shapiro, Irving J. Stitsky, and William B. Foster (collectively, the "Individual Defendants"). The three sets of attorneys named as defendants are Defendants Robert F. Cohen and his firm, Cohen & Werz LLC (the "Cohen Defendants"); Martin P. Unger and his firm, Certilman Balin Adler & Hyman LLC (the "Certilman Defendants"); and Philip Chapman and his firm, Lum, Danzis, Drasco & Positan LLC (the "Lum Defendants") (collectively, the "Law Firm Defendants").

The Complaint alleges that the Individual Defendants engaged in a massive fraud on the investing public by setting up the Cobalt entities, and persuading members of the public to invest millions of dollars in these same entities through various misrepresentations and cold-calling schemes. (Compl. §§4, 51-87.) The Individual Defendants then allegedly misappropriated the majority of the funds invested in the Cobalt entities for their own personal use. (Compl. §§83-85.) The Complaint alleges that the Law Firm Defendants assisted the Individual Defendants in committing this investor fraud, and in subsequently looting the Cobalt entities of corporate assets. (Compl. §§94-137"

A. The Wagoner Rule.

In challenging the Receiver's standing, the Law Firm Defendants rely principally on the line of decisions beginning with Shearson Lehman Hutton, Inc. v. Wagoner, 944 F.2d 114 (2d Cir. 1991) ("Wagoner"), which addresses the issue of standing in the bankruptcy context. (Report 32-37.) In Wagoner, the Second Circuit stated the "well settled" principle that a bankruptcy trustee has standing to assert only those claims held by the bankrupt corporation. Id. at 118 (citing Caplin v. Marine Midland Grace Trust Co., 406 U.S. 416, 434 (1972)). A bankrupt corporation lacks standing to assert fraud claims against third parties where those third parties assisted corporate managers in committing the alleged fraud.6 Wagoner, 944 F.2d at 120; In re CBI Holding Co., Inc., 311 B.R. 350, 368-69 (S.D.N.Y. 2004) ("CBI Holding I"). Thus, under Wagoner, a bankruptcy trustee also lacks standing to assert such fraud claims against third parties. See In re Bennett Funding Group, Inc., 336 F.3d 94, 99-100 (2d Cir. 2003).

In Hirsch v. Arthur Anderson & Co., 72 F.3d 1085 (2d Cir. 1995), the Second Circuit applied the Wagoner rule to also preclude a bankruptcy trustee from asserting certain claims against third parties that are based in fraud, but are denominated as claims other than fraud (e.g., malpractice or breach of contract). See Hirsch, 72 F.3d at 1094-95 (applying Wagoner rule to preclude bankruptcy trustee's malpractice claim where the claim was based on allegations that the defendant assisted corporation managers in defrauding the corporation); see also In re CBI Holding Co., Inc., 318 B.R. 761, 766 (S.D.N.Y. 2004) ("CBI Holding II") (applying Wagoner rule to bar plaintiff's breach of contract, negligence, and fraud claims against defendant accounting firm where the claims were "premised on allegedly deficient auditing by [defendant] that failed to discover fraudulent acts committed by certain members of [corporate] management"); Breeden v. Kirkpatrick & Lockhart, LLP, 268 B.R. 704, 709 (S.D.N.Y. 2001) (applying Wagoner rule to preclude plaintiff's various claims against defendant professionals where the claims alleged that defendants' misconduct "allowed the [corporate principals] to perpetuate their fraudulent scheme"). "

Today's Outside Counsel Column in the NYLJ by Garber and Vaughn does not mention or discuss legal malpractice.  Nevertheless, its thesis is highly relevant. 

"The 212 people exonerated by DNA evidence since 1989 have raised significant awareness about the criminal justice system's failure to protect the innocent from wrongful conviction and have led to reform in the handling of criminal investigations and prosecutions.

As 149 of these DNA exonerations have come in the last seven years, a body of data has recently developed that can now be relied upon for meaningful analysis of the causes of erroneous convictions. Cases most likely to result in the conviction of the innocent involve faulty eyewitness identification, misleading forensic evidence, false confessions, or unreliable informant testimony."

Beyond systematic problems in criminal prosecution, there is the lurking elephant of poor work by a criminal defense attorney.  Regularly unavailable for a legal malpractice case, in the absence of actual innocence, the cases of these 212 should similarly be examined for attorney shortcoming.

Incidentally, the legal malpractice statute of limitations starts to run with exoneration.

Here is a primer in how litigation can go sour, starting with one problem, leading to one after another.  This  NJ case discusses affidavits of merit in NJ legal malpractice cases, pro-se litigants and potential dispensations to them, and the statute of limitations in bankruptcy cases. SHIRLEY A. GOODHEART, v. STEVEN P. KARTZMAN, ESQ.; WACKS, MULLEN & KARTZMAN; GLEN SAVITS, ESQ.; LUCAS, SAVITS AND MAROSE, LLC; and GREEN AND SAVITS, LLC,

"Plaintiff now argues that (1) the statute of limitations did not bar the amended complaint because the discovery rule should apply and no malpractice claim accrued until the bankruptcy plan was confirmed on June 17, 2002; and (2) the trial court erred in failing to enter an order memorializing the trial judge's instruction that plaintiff file an amended complaint within thirty days, thereby prejudicing a pro se plaintiff.

With respect to the statute of limitations, it is unclear in the complaint whether the allegations arise from confirmation of the bankruptcy plan in 2002 or the reopening of the Chapter 7 bankruptcy proceeding in 1999. We are, therefore, constrained to remand for a hearing pursuant to Lopez v. Swyer, 62 N.J. 267 (1973), to determine when the cause of action actually accrued.

With respect to plaintiff's second point, she is entitled to no special consideration as a pro se plaintiff. She must be aware of the law and compliant with the Rules of Court as does any other litigant. Tuckey v. Harleysville Ins. Co., 236 N.J. Super. 221, 224 (App. Div. 1989). The judge instructed her to file the amended complaint within thirty days of the July 14, 2006 case management conference. She did not file her motion to restore and amend the complaint until August 27, 2006; however, we expressly decline to reverse the February 16, 2007 order at this juncture. Rather, the matter is remanded for a Lopez hearing to determine whether plaintiff filed the complaint within the statute of limitations. If the court finds that she did, plaintiff may move to restore the complaint and proceed with the litigation. If, on the other hand, the trial court finds that the cause of action accrued in 1999, rather than 2002, the complaint shall remain dismissed.

This front page article from the NYLJ tells of a new type of legal malpractice case originating in a securities law suit, by a non-client, stretching the bounds of privity:

"A federal judge in Manhattan has ruled that a lawsuit brought under Oregon "Blue Sky" law may proceed against the New York law firm Seward & Kissel for allegedly aiding and abetting securities fraud by a client hedge fund.

Aider and abettor claims against lawyers or accountants in securities fraud cases are barred under federal law. But Southern District Judge Harold Baer has ruled they are permissible under a state securities fraud statute, or Blue Sky law.

The suit by Oregon-based investor Howard Houston stems from Seward & Kissel's representation of Wood River Partners, a hedge fund that collapsed in 2005 after a sharp decline in the stock of Endwave Corp., the small technology company that comprised more than 60 percent of the fund's holdings.

Mr. Houston claims he invested $2.75 million in Wood River based on offering documents and marketing materials that stated Wood River would pursue a diversified investment strategy. He claims Seward & Kissel helped Wood River perpetrate fraud because the law firm drafted some of the documents and allowed its name to be used in the fund's prospectus"

Bankruptcy Legal Malpractice cases are on the rise.  Trustees have greater powers than do regular plaintiffs, there are longer statutes of limitation in Bankruptcy situations, and the numbers are really big.  Here is a case from the NY Lawyer site.

"Gibson, Dunn & Crutcher is the latest law firm to be named in a suit stemming from the breakdown of the commodities firm Refco, Inc. The action, filed by liquidators and the trustee for Sphinx Funds, a family of funds that collapsed after doing business with Refco, was filed March 8 in New York trial court; a notice of removal to federal district court in Manhattan was filed by one of the defendants March 28.

Refco filed for bankruptcy in October 2005. Several lawsuits and criminal proceedings have followed. This latest action claims the funds lost $263 million as a result of Refco¹s meltdown; Gibson, Dunn's representation of various Sphinx entities also contributed to the loss, the suit claims.

Gibson, Dunn represented Sphinx Funds and its investment manager, PlusFunds, Inc., as well as fund directors and entities controlled by those directors.

Work for those entities was a conflict of interest that the firm never disclosed, the complaint says. The plaintiffs also charge Gibson, Dunn with helping to conceal the nature of numerous loans made by Refco to Sphinx directors that were in fact payments to those directors in exchange for Sphinx's business with Refco. "

Here , in AccuWeb, Inc., Raymond Buisker, v.  Foley & Lardner, Harry C. Engstrom, Quarles & Brady LLP and Nicholas Seay, we find one of the rare state court patent legal malpractice cases.  Generally, as patent law is a federal question, one of the parties either brings the action in Federal District Court or removes it there.  Here is the decision on a motion for summary judgment:

"This case centers on whether AccuWeb, at the summary judgment stage, put forth sufficient evidence to raise a genuine issue of material fact on the question of whether the alleged failure of the Respondents to prevent the premature expiration of AccuWeb's 5,072,414 patent (the 414 patent) was a substantial factor in causing AccuWeb actionable damages, thus preventing summary judgment. The second issue is whether AccuWeb presented sufficient evidence to allow a fair and reasonable estimate of the amount of such damages, so that there was a genuine issue of material fact, thus preventing summary judgment as to the amount of those damages. We address the second issue because it was addressed by the circuit court. This case involves the interpretation and application of Wis. Stat. § 802.08 (2003-04),[2] the Wisconsin summary judgment statute. "

The familiar triumverate of client, insurance company and independent defense attorney is a familiar model.  Certainly, there are cracks in the facade.  The attorney has dual roles, and a divided loyalty...  In Texas, a recent ruling permits the insuran