Legal Malpractice and Attorney Fees - A Primer

Legal Malpractice and Attorney Fees are coupled throughout the case law involving attorneys.  They generally arrive on the scene together, and resolution of one generally disposes of the other.  In Daniel R. Wotman & Assoc., PLLC v Chang  2012 NY Slip Op 31845(U)  July 9, 2012
Supreme Court, New York County  Docket Number: 110893/2010  Judge Judith J. Gische writes about many of the typical tropes:  attorneys trying to change the terms of flat fees into hourly rates, attorneys deciding that the client just isn't reasonable about settlement, clients not wanting to settle, clients getting bills and making a decision to pay a little, and cajole the attorney into doing something on appeal, attorneys leaving "biglaw" and trying to make it in the more modest legal world.

Plaintiff is a law firm named after its principal, Daniel R. Wotman, Esq. Chang  was a 50% shareholder in 207 Second Avenue Realty Corp. ("corporation"). The other shareholders (Ruby and Wilson Chang) held the remaining 50% interest. The corporation owned the building located at 207 Second Avenue, New York, New York. The law firm contends it is owed legal fees by Chang in the principal amount of $438,31 I .19 for legal services rendered in pursuit of three related cases involving Chang as follows: Citidress II Cora. v, 207 Second Avenue Realtv Carp, , Index
No.121848199 ("Citidress"), Gold Citv Commercial Bank v. 207 Second Avenue Corp, Index No. 104319 /93 ("Gold City") and Janet Chang, as assignee v. Botsacos, Index No. 2242/86.

Citidress and Gold City were each foreclosure actions. In Citidress, Chang brought a cross claim against her fellow shareholders (Wilson and Ruby Chang), alleging that they obtained a mortgage secured by the building without her knowledge. Chang subsequently bought the mortgage from Gold City, but was apparently never substituted as named plaintiff. In September 2007, Chang sold the building for $5,000,000 and Hon. Alice Schlessinger, the judge presiding over the Citidress case, dealt with various issues resolving that action. The Cartelli case is for legal malpractice.
Chang alleges that Thomas Cartelli, Esq. (now deceased), assisted the other shareholders in obtaining the mortgage through fraudulent means, including phony board minutes.

Chang, Individually and as Officer and Director of the corporation, entered into two (2) separate retainer agreements with the law firm.

Following B ten day trial on the Cartelli malpractice claim, at which Chang was represented by Wotman, on October IO, 2002, the jury returned a verdict in favor of Chang. The award consisted of $1,930,491 on the malpractice claim, $3,000,000 in punitive damages and $176,000 In legal fees. The jury found that Thomas Cartelli had been negligent and assisted the other shareholders (Wilson and Ruby Chang) in obtaining a mortgage without Janet Chang’s written consent, etc., and that Cartelli’s negligence had resulted in the diversion of the mortgage proceeds. Judgment was not immediately entered by Wotman In the Cartelli action.

A few months later, on June 13,2003, Cartelll’s malpractice insurance carder, The Home Insurance Company, was declared insolvent and The Superintendent of Insurance took possession of its property and assets (Supreme Court Index No. 402871-2003). Wortman did not enter judgment In the Cartelli malpractice action until several years later, on August 10, 2010. After serving the judgment on the Superintendent of Insurance, Wotman was notified (on August 19,2010) that the Liquidation Bureau had rejected the judgment on the basis that “it was not entered in accordance with applicable law.” The Cartelli judgment was appealed and affirmed on
appeal (Chang v. Botsacosa, 92 A.D.3d 610 [1st Dept 2012). No portion of the Cartelli judgment has been satisfied to date."

Meanwhile, in August 2004, Wotman moved to be relieved as counsel in the Citidress and Golden City motions, stating that Chang was "ignoring" his legal advice and pursuing that case and others "merely for the purpose of harassing and maliciously injuring other parties, including [the law firm]." Wotman also stated that mandatory withdrawal by his firm was necessary because "Chang and [the corporation] are out of control. Our law Firm cannot bring these clients under control ... They are not following our advice and instructions.. ." The motion was argued before Justice Heitlar on the record (Steno Minutes 10/6/04)2 and Chang stated that relieving Wotman would prejudice her case because he had taken it on a contingency basis "with a flat charge for some other matters
because he knew that I was not able to pay [legal fees] after many, many lawyers sort of like given up because I was not paying." Chang also stated that Wotman, who had recently left a "big law firm" was "[putting] quite a bit of pressure for me to give up the malpractice case, which is something that he did not have experience [with] ..." According to Chang, once Wotman was no longer with that "big firm," he started "[asking] me to give money to him, which I did not have. In fact, then he suggested that he should use the money in the receiver's account and I agreed to allow him to apply to the Judge to have the use of that money, which would be deducted against the final payment of the contingency fee and fortunately, Judge Lebedeff declined to allow him
use [of] that money."  Justice Heitler, noting that the retainers were not a part of the record, asked
whether Wotman was owed any legal fees. He responded that he was and that his retainer agreement had "expired a while ago-back In April of 2001, it was a limited fee retainer ..." The issue of whether there it was a conflict of interest for the corporation and Chang to have been jointly represented by Wotman was also raised during that oral argument. According to Wotman, that conflict had been "waived." Wotman's motion to be relieved was granted by Justice Heitler.

We'll continue with this attorney fee primer on Monday.

 

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