Corporations, Individuals and Legal Malpractice

Daughter works for a law firm, and hears of a financial opportunity.  She gets her parents involved, and surprise...the loans do not work out!  They sue the law firm for legal malpractice.  Rodolico v Rubin & Licatesi, P.C.   2013 NY Slip Op 08068 [112 AD3d 608]   December 4, 2013
Appellate Division, Second Department  stands for two things.  The first is that standing is very, very important in legal malpractice.  If you did not hire the attorney, you may not sue the attorney.

"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 [1985]; see Citibank v Plapinger, 66 NY2d 90, 93 n [1985]; Elenson v Wax, 215 AD2d 429 [1995]; General Motors Acceptance Corp. v Kalkstein, 101 AD2d 102, 106 [1984]). 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 [2007]), 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.

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