Big Players, Bad Result, Some Skullduggery
Attorney sues his former law firm. At the arbitration, no expert is presented to value the law firm. Arbitrators rule against the attorney. He then finds second law firm to "assist in obtaining relief." No relief is obtained, and the second law firm surreptitiously sets up a legal malpractice case against the "co-attorney." Is this wrong?
Roberts v Corwin 2014 NY Slip Op 04563 Decided on June 19, 2014 Appellate Division, First Department.
"Defendants represented plaintiff, an attorney, at an arbitration hearing against his former law firm. On May 11, 2006, the arbitration panel issued an interim award, finding that plaintiff had failed to prove any damages, based in large part on the absence of expert testimony regarding the value of the law firm. Following the unfavorable interim award, plaintiff, with defendants' knowledge and agreement, hired a partner at his current law firm, Epstein Becker & Green (EBG), to assist in obtaining relief from the interim award, including trying to negotiate a settlement with plaintiff's former partners. While these negotiations proceeded, defendants were still actively representing plaintiff. Defendants characterize their relationship with EBG at the time as being co-counsels. The effort at settlement failed and on July 13, 2006, the arbitration panel issued a final award against plaintiff which incorporated in major part the unfavorable interim award. As a result, plaintiff was directed to pay hundreds of thousands of dollars in legal and other fees to his former law firm.
Defendants then filed a petition on plaintiff's behalf, seeking to vacate the arbitration award. In April 2007, the Supreme Court denied plaintiff's petition and the final award was confirmed. After the unfavorable interim award and as early as May 2006, plaintiff was also seeking advice from John Sachs, another attorney at EBG, about a potential malpractice action against defendants. A demand letter asserting a claim for malpractice based upon defendants' failure to disclose an expert witness, was sent by EBG to defendants in October 2007. In November 2009, EBG, acting as plaintiff's counsel, commenced the instant malpractice action against defendants.
Defendants' motion for sanctions, including dismissal of the complaint or the disqualification of EBG from continuing to represent plaintiff was denied, as was defendants' [*2]separate motion for summary judgment.
"There is no disciplinary rule that expressly prohibited EBG from giving plaintiff legal advice about the feasibility of a malpractice action while at the same time working with defendants to obtain a better result for plaintiff in the arbitration matter, especially when it was clear to defendants that EBG was representing plaintiff's interests. While we share the motion court's concerns about EBG's failure to disclose that a malpractice action was being considered, those concerns do not support the sweeping remedies sought by defendants of either dismissing this action or disqualifying plaintiff's chosen counsel."
"Sanctions were also properly denied in connection with plaintiff's failure to disclose a file maintained by his former counsel, who counseled him after the alleged acts of malpractice had occurred, since defendants failed to establish that the file contained discoverable documents that could affect their defense.
The court correctly denied defendants' motion for summary judgment since defendants failed to establish that, even in the absence of their alleged negligence, i.e. their failure to introduce expert testimony during the arbitration of plaintiff's partnership interest in his former law firm, plaintiff would not have prevailed at arbitration (see AmBase Corp. v Davis Polk & Wardwell, 8 NY3d 428, 434 ). They did not show that the arbitration panel's finding that plaintiff failed to prove impropriety in the dissolution and liquidation of the firm precluded an award of damages (cf. Kaminsky v Herrick, Feinstein LLP, 59 AD3d 1 [1st Dept 2008], lv denied 12 NY3d 715 ). Indeed, in rejecting plaintiff's claim that respondents "looted" the firm, the arbitration panel noted that plaintiff had not shown that respondents' appraisal reports were materially inaccurate or presented any expert testimony in that regard.