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. "