Unsophisticated Legal Malpractice Claims in a Sophisticated Commercial Case

High end financing companies tailored to the art and antique world hit a bare patch, and suddenly are in $20 Million + financing difficulties.  They hire plaintiff law firm in the Hahn & Hessen LLP v Peck   2013 NY Slip Op 33017(U)  November 25, 2013  Sup Ct, New York County  Docket Number: 603122/08  Judge: Barbara Jaffe which is seeking its attorney fees.  Simply put, in the face of extremely sophisticated financing agreements, and multiple-draft settlement agreements of disputes valued at over $ 20 million, counterclaimant's case derives from the unsophisticated claims that he was unaware of the terms of the settlements.

"In 2007, SageCrest II, LLC (SageCrest), a private equity firm, sued defendants, alleging  that they had defaulted under the terms of a loan. (SageCrest II LLC v ACG Credit Company, LLC, et al., index No. 600195/2007). (NYSCEF 157). On or about September 11, 2007, another justice of this court granted an ex parte order of attachment against defendants ACG Credit Company, LLC and Art Capital Group II, LLC (ACG II), securing $29,841,156.19 allegedly owed SageCrest. Following a mediation session on January 25, 2008, the parties signed a shortform settlement agreement, which, inter alia, requires that defendants pay SageCrest $29,925,000, $21 million of which would effectively vacate the order of attachment. The agreement is subject to further revisions and final documentation, and either party is authorized to submit it to the court to be so-ordered. (Id., Exh. B).Unable to secure the $21 million, defendants, represented by plaintiff, sought to renegotiate the terms of the settlement, offering $14.3 million in cash and an assignment of $6.7 million in loans due defendant ACG II. SageCrest rejected defendants' offer and sought by motion to have the court so-order the short-form agreement. (NYSCEF 157, Exh. C). In response, defendants sought, also by motion, to have the proposed assignment treated as the "cash equivalent" of the $6.7 million. They attached to their motion an affidavit from Peck asserting his repeated and unsuccessful efforts to assure SageCrest that the loans would be paid. (Id., Exh. D). "

"At an EBT held on June 27, 2011, Peck testified that he recalled questioning Newman on May 18 as to whether the agreement protected him personally, and that Newman responded that the pledged loans were the sole security for the assignment, along with the "credit enhancement
of my limited personal guarantee," and that this limitation of liability was the "beauty of the settlement." (NYSCEF 168). Although Peck conceded that he had no reason to believe that SageCrest had agreed to the sole recourse provision, he nonetheless maintained that he thought
that the sole recourse provision was included in the final agreement. (NYSCEF 168).At an EBT held on June 27, 2011, Peck testified that he recalled questioning Newman on May 18 as to whether the agreement protected him personally, and that Newman responded that the pledged loans were the sole security for the assignment, along with the "credit enhancement of my limited personal guarantee," and that this limitation of liability was the "beauty of the settlement." (NYSCEF 168). Although Peck conceded that he had no reason to believe that SageCrest had agreed to the sole recourse provision, he nonetheless maintained that he thought that the sole recourse provision was included in the final agreement. (NYSCEF 168)."

"Plaintiff has thus established, primafacie, that it did not breach the standard of professional care and that its actions were not the proximate cause of the 2009 action. (See Engelke v Brown Rudnick Berlack Israels LLP, _ NYS2d _, 2013 NY Slip Op 07419 [1st Dept 2013] [plaintiff could not show with sufficient certainty that, absent alleged malpractice, he would have been able to avert defending second lawsuit]; Natural Organics Inc. v Anderson Kill & Glick, P.C., 67 AD3d 541, 542 [1st Dept 2009], Iv dismissed 14 NY3d 881 [2010] [plaintiff failed to demonstrate causal connection between alleged malpractice and injuries]; Cohen v Weitzner, 47 AD3d 594, 595 [1st Dept 2008] [typographical error on defendant attorneys'  spreadsheet not proximate cause of plaintiffs' injury]; Leder v Speigel, 31 AD3d 266, 268 [1st Dept 2006], affd 9 NY3d 836 [2007], cert denied 552 US 1257 [2008] [plaintiffs malpractice claim based on unsupported, conclusory assertion that defendant's alleged erroneous advice proximately caused injury]; Merz v Seaman, 265 AD2d 385, 389 [2d Dept 1999] [defendant attorneys who allegedly negligently drafted contract not liable for failing to warn banker-client about repercussions of personal guarantee]; Levine v Lacher & Lovell-Taylor, 256 AD2d 147 [1st Dept 1998] [plaintiffs disposition of collateral in disregard of court order was sole proximate cause of his injury; that alleged negligent drafting of loan agreement contributed to injury ..."

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