Moving To Dismiss Without the Documents in Legal Malpractice

A large number of legal malpractice cases are dismissed at the beginning on CPLR 3211 motions.  We believe that legal malpractice cases are overrepresented in these dismissals.  Endless Ocean, LLC v Twomey, Latham, Shea, Kelley, Dubin & Quartararo    2014 NY Slip Op 00087 [113 AD3d 587]   January 8, 2014   Appellate Division, Second Department  is an example of this phenomenon, as well as an illustration of the dangers of a 1031 Like-kind exchange of real property intended to avoid capital gains taxation.

"The plaintiff commenced this action to recover damages allegedly sustained as a result of the defendants' legal malpractice. As alleged in the complaint, the plaintiff retained the defendants to represent it in connection with the sale of certain real property and a related exchange of "like-kind property" pursuant to the Internal Revenue Code (see 26 USC § 1031). According to the allegations in the complaint, the plaintiff, based upon the defendants' advice, selected LandAmerica 1031 Exchange Services, Inc. (hereinafter LandAmerica), as the qualified intermediary to hold a portion of the sale proceeds, totaling $5.5 million, for the exchange of like-kind property pursuant to 26 USC § 1031. The complaint alleged, inter alia, that the defendants negligently represented the plaintiff inasmuch as they reviewed, and advised the plaintiff to execute, an agreement with LandAmerica, under which the exchange funds were to be held in a commingled [*2]account and not a qualified escrow account or trust. Soon after the sale proceeds were transferred to LandAmerica, its parent corporation, LandAmerica Financial Group, Inc., declared bankruptcy. According to the complaint, the plaintiff's funds were frozen for several years during the bankruptcy proceedings, and the plaintiff lost a portion of the funds because they were not held in a qualified escrow account or trust. The complaint further alleged that the plaintiff could not defer the taxes on the capital gains from the initial sale, as it did not have access to its funds to purchase a replacement property within the required 180-day period."

"The Supreme Court improperly granted the defendants' motion to dismiss the complaint based on documentary evidence. A motion to dismiss a complaint pursuant to CPLR 3211 (a) (1) may be granted only if the documentary evidence submitted by the moving party utterly refutes the factual allegations of the complaint, "conclusively establishing a defense as a matter of law" (Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d 314, 326 [2002]). Here, the retainer agreement submitted by the defendants did not conclusively establish a defense as a matter of law (see Harris v Barbera, 96 AD3d 904, 905-906 [2012]; Rietschel v Maimonides Med. Ctr., 83 AD3d 810, 811 [2011]; Shaya B. Pac., LLC v Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, 38 AD3d 34, 38-39 [2006])."

"The documents submitted by the defendants on appeal, which were annexed to their brief, are not properly before this Court, as they were not submitted to the Supreme Court (see CPLR 5526; Constantine v Premier Cab Corp., 295 AD2d 303, 304 [2002]). Moreover, the defendants' arguments that relied upon these documents were improperly raised for the first time on appeal (see Salierno v City of Mount Vernon, 107 AD3d 971, 972 [2013])."

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