New York Attorney Malpractice Blog

New York Attorney Malpractice Blog

No Service, No Case

Posted in Uncategorized

DeMartino v Harris  2018 NY Slip Op 08278  Decided on December 5, 2018 Appellate Division, Second Department stands for the proposition that if a case is flawed in its service, it remains flawed throughout.  Here, service was demonstrably no good.  Nothing further good could save the case.

“The plaintiffs commenced this action against the defendant, their former counsel, inter alia, to recover damages for legal malpractice in connection with legal representation provided to them by the defendant years earlier. The affidavit of service in the action characterized the defendant as a domestic corporation and recited that service had been made by leaving the summons and complaint with the defendant’s representative at the defendant’s office address.

When the defendant did not respond to the complaint, the plaintiffs moved for leave to enter a default judgment against the defendant. Thereafter, the defendant cross-moved, inter alia, to dismiss the complaint for lack of personal jurisdiction, contending that the method of service was improper because the defendant was not a corporation. The plaintiffs subsequently moved for leave to amend their complaint. The Supreme Court granted that branch of the defendant’s cross motion which was pursuant to CPLR 3211(a) to dismiss the complaint, concluding that service was not properly made, and denied the plaintiffs’ motions. The plaintiffs appeal.

While the method of service employed by the plaintiffs in this action is authorized for the service of process upon a corporation (see CPLR 311[a][1]; Fashion Page v Zurich Ins. Co., 50 NY2d 265, 271; Lakeside Concrete Corp. v Pine Hollow Bldg. Corp., 104 AD2d 551, 551-552, affd 65 NY2d 865), the evidence submitted by the defendant in support of the cross motion to dismiss established that the defendant is not a corporation. Accordingly, the method of service employed by the plaintiffs failed to acquire personal jurisdiction over the defendant, and we agree with the Supreme Court’s determination granting that branch of the defendant’s cross motion which was to dismiss the complaint on that basis.

Furthermore, while CPLR 306-b permits a court, in the exercise of its discretion, to [*2]extend the time to serve process upon good cause shown or in the interest of justice (see Leader v Maroney, Ponzini & Spencer, 97 NY2d 95, 101), the plaintiffs did not move for, or otherwise request, an extension in the Supreme Court (see Lehman v North Greenwich Landscaping, LLC, 65 AD3d 1293, 1295; Matter of Saltzman v Board of Appeals of Vil. of Roslyn, 26 AD3d 505, 505-506).”

Legal Malpractice in a Real Estate Development Setting

Posted in Legal Malpractice Cases

Whether there has been legal malpractice in a real estate development setting, or no malpractice at all depends on at least four elements.  The least interesting of these elements is the departure.  In almost every legal malpractice case there is a definite departure.  It’s the “proximate cause” and the “but for” portions of the equation that are much more interesting.  In Bauhouse Group I, Inc. v Kalikow  2018 NY Slip Op 33055(U)  December 4, 2018  Supreme Court, New York County
Docket Number: 158277/2017 Judge: Saliann Scarpulla which we discussed last week, not only was collateral estoppel a problem, but the Court found that there was no proximate cause connection between the alleged wrongs and the bad outcome.  Put another way an unwaivable conflict without more is insufficient.

“The remaining allegations in the complaint underlying the malpractice claim are that: Defendants had unwaivable conflicts of interest while representing Plaintiffs because Kalikow was related to Lenders and because Defendants’ represented Lenders in other, unrelated matters; these conflicts were not adequately explained or waived; and Defendants coerced Bauhouse to sign the inadequate Waiver Letter.

To state a claim for legal malpractice, the plaintiff must allege: “the negligence of the attorney; that the negligence was the proximate cause of the loss sustained; and proof of actual damages.” Between The Bread Realty Corp. v Salans Hertzfeld Heilbronn Christy & Viener, 290 AD2d 380, 380 (1st Dept 2002) (internal citations omitted). In order to adequately allege proximate cause, the plaintiff “must plead specific factual allegations establishing that but for counsel’s deficient representation, there would have been a more favorable outcome to the underlying matter,” Dweck Law Firm, LLP v Mann, 283 AD2d 292, 293 (1st Dept 2001) (citation omitted), or that “plaintiff would have prevailed in the matter at issue or would not have sustained any damages.” Between
The Bread Realty Corp., 290 AD2d at 380 (citations omitted).

Here, the complaint does not contain factual allegations sufficient to establish that the purportedly ill-explained unwaivable conflicts of interest were the proximate cause of any alleged harm to Plaintiffs. See Schafrann v NV Famka, Inc., 14 AD3d 363, 364 (1st Dept 2005) (“A conflict of interest, even if a violation of the Code of Professional Responsibility, does not by itself support a legal malpractice cause of action.” (citation omitted)); Coleman v Fox Horan & Camerini, LLP, 274 AD2d 308, 309 (1st Dept 2000); see also Kodsi v Gee, 100 AD3d 437, 438 (1st Dept 2012) (citations omitted).

Moreover, the complaint is devoid of any factual allegations to support the Plaintiffs’ contention that Defendants coerced Bauhouse into executing the Waiver Letter. See generally Rau v Borenkojf, 262 AD2d 388, 388 (2d Dept 1999) (complaint containing conclusory allegations, “unsupported by any factual allegations, that the defendants negligently advised and coerced [plaintiff] to settle his claim, and that he would have obtained a higher settlement or judgment but for their negligence” failed to state claim for malpractice).

In sum, to the extent that Plaintiffs’ allegations survive the application of collateral estoppel, they nevertheless fail to state a cause of action for malpractice.”

A Huge Real Estate Project Gone Wrong…But No Legal Malpractice

Posted in Legal Malpractice Cases

Real Estate rules Manhattan, and big (really big) money is attracted to the thought of new buildings in prime locations.  Bauhouse Group I, Inc. v Kalikow  2018 NY Slip Op 33055(U)
December 4, 2018  Supreme Court, New York County  Docket Number: 158277/2017
Judge: Saliann Scarpulla is the story of a Sutton Place project which started, started to sour, went bad and almost ended in Bankruptcy Court.  It then morphed into a lost legal malpractice case.

“This action arises out of a failed residential real estate development project (the “Project”) which resulted in several federal and state court actions. The facts of the underlying dispute have been set forth in extensive detail in a post-trial decision from a related adversary proceeding filed in the United States Bankruptcy Court of the Southern District of New York (“Bankruptcy Proceeding”), In re BH Sutton Mezz LLC, AP 16- 01187 (SHL), 2016 WL 8352445 (Bankr SDNY 2016) (hereinafter, the “Bankruptcy Decision”), of which I take judicial notice. ”

“The Principals set out to purchase plots of land located at 426-432 E. 58th Street, New York, New York I 0022 and the related air rights (the “Property”) on which to develop the Project. The Principals led the Project, and Bauhouse planned the development of the Project. Beninati hired numerous advisors to assist Plaintiffs and Debtors in completing the Project, including several debt and equity financing advisors.
On June 24, 2014, Beninati, on behalf of Sutton NY, retained Defendants to represent Sutton NY in the Project.3 The complaint alleges that Plaintiffs retained Defendants in November 2014 to represent them in the Project.
In June 2014, Debtors entered into an agreement to purchase the Property. Thereafter, the Principals, with the help of their advisors, sought equity and debt investors to finance the purchase of the Property and the development of Project. In November 2014, Kalikow and Beninati discussed the possibility of obtaining financing from Kalikow’s cousins, N. Richard Kalikow and Jonathan Kalikow (collectively, “Lenders”), who were the principals of Gamma Funding, LLC. Shortly thereafter, the Principals met with the Lenders to discuss their financing options and
subsequently sent the Lenders additional information about the Project.

During this time, the Principals, Debtors, and their advisors were actively pursuing other investors. These efforts later proved to be unsuccessful and “Debtors had significant difficulties getting financing because they had invested so little of their own money in the [P]roject, thus making traditional lenders unwilling to bankroll the project.” Bankruptcy Decision at 14. ”

“Debtors ultimately defaulted on their loan obligations and filed for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court of the Southern District of New York. The Debtors subsequently commenced an adversarial proceeding against the Lenders.
In November 2016, the Bankruptcy Court conducted a five-day trial, and the posttrial decision organized the Debtor’s remaining thirteen claims (Debtors originally asserted 26 claims against Lenders) into seven categories: unconscionability; lender liability; breach of contract; breach of implied covenant; equitable subordination; fraudulent transfer; and criminal usury. The court ruled in favor of Debtors only for the criminal usury claim5 and granted judgment for the defendants on all remaining claims.

Plaintiffs commenced this action in September 2017, asserting claims for professional negligence and/or legal malpractice, fraud under New York Judiciary Law §487, and breach of contract.
The complaint alleges that Plaintiffs retained Defendants to represent them in the Project in November 2014. During this period of representation, Kalikow introduced Plaintiffs to, and assisted them in obtaining financing for the Project from Lenders, who were principals of Gamma Funding, LLC and related to Kalikow. Kalikow allegedly failed adequately to inform Plaintiffs that he was related Lenders and that Defendants represented the Lenders on various other real estate matters, both of which constitute unwaivable conflicts of interest. To cover up these purportedly un-waivable conflicts, Defendants allegedly drafted and “coerced” Bauhouse to sign the Waiver Letter. ”

“Collateral Estoppel
“The doctrine of collateral estoppel, a narrower species of res judicata, precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party or those in privity, whether or not the tribunals or causes of action are the same.” Ryan v New York Tel. Co., 62 NY2d 494, 500 (1984) (citations omitted); see also Physicians’ Reciprocal Insurers v Loeb, 291 AD2d 541, 543 (2d Dept 2002) (Collateral estoppel “prevents repetitive litigation and potentially inconsistent judgments by providing, in general, that once a particular question of fact has been decided in one judicial forum, that same question of fact may not be reopened for further litigation in the context of a subsequent judicial proceeding.” (citations omitted)). ”

“Plaintiffs’ argument that collateral estoppel cannot apply because the issue of Defendants’ malpractice was not litigated in the Bankruptcy Proceeding is without merit. “[C]ollateral estoppel precludes assertion of the same wrong under a different legal theory,” Korea First Bank of NY. v Noah Enterprises, Ltd., 12 AD3d 321, 323 (1st Dept  2004) (citations omitted), and an issue arising “in an entirely distinct cause of action is no impediment to collateral estoppel.” Fallek v Becker, Achiron & Isserlis, 246 AD2d 394, 395 (1st Dept 1998) (citations omitted).

Although there was no malpractice claim asserted against Defendants in the Bankruptcy  Proceeding, the Bankruptcy Decision necessarily decided and “addressed issues identical to those raised by” Plaintiffs’ malpractice claim here. Sanders v Grenadier Realty, Inc., 102 AD3d 460, 461 (1st Dept 2013) (precluding re-litigation of issues underlying state claim where identical issues underlying claim were decided by federal court that had refused to exercise jurisdiction over state claims); see also Hudson v Merrill Lynch & Co., Inc., 138 AD3d 511, 515 (1st Dept 2016), lv to appeal denied, 28 NY3d 902 (2016) (party estopped from relitigating “discrete factual issues” decided against that party in prior federal litigation); Women’s Interart Ctr., Inc. v New York City
Economic Dev. Corp. (EDC), 65 AD3d 426, 427 (1st Dept 2009). ”

“While Defendants have met their initial burden of proof, Plaintiffs have failed to meet their burden of demonstrating that they lacked a fair opportunity to litigate these issues or to contest the Bankruptcy Decision. Therefore, Plaintiffs here are precluded from relitigating the above findings, including the complaint’s allegations that Defendants negligently put Plaintiff’s into risky commercial transactions that were guaranteed to fail, that Defendants failed to explain the risks involved in entering into these financing transactions, and that Defendants and Lenders were engaged in a loan-to-own scheme. “

A Massive Tax Loss, But So Long Ago

Posted in Legal Malpractice Cases

Boesky v Levine  2018 NY Slip Op 33017(U)  November 27, 2018  Supreme Court, New York County  Docket Number: 650756/2017  Judge: Eileen Bransten is a story containing the only certainties in life:  massive taxes and death, along with  a tricky tax scheme, bankruptcies, indictments, millions of dollars in losses and 15 years of litigation.  This case ends in dismissal, mostly for taking too long to sue.

“In this action, plaintiffs seek to recover damages for, among other things, defendants’
alleged fraud and negligence in connection with their tax-related advice, in the preparation of
plaintiffs’ ta”{ returns, and in their representation of plaintiffs in the litigation of a tax dispute.
Defendants Mazars USA LLP as successor in interest to Weiser LLP (Mazars USA), Herrick
Feinstein LLP (Herrick Feinstein), Moritt Hock & Hamroff LLP (Moritt Hock), and Harold
Levine, separately nove to dismiss the complaint insofar as asserted against them pursuant to
CPLR 3211 (a) (5) and (a) (7) (Motion Sequence Nos. 001- 004, respectively). 1 For the
following reasons, the motions are granted”

“Plaintiffs Boesky and Hirmes were senior executives of The Related Companies, Inc.
(Related), a global real estate development firm to which Katz provided tax advice and
accounting services. ld. at il~i 22-24. In or about 2002, Boesky approached Katz, who had
become a trusted advisor to plaintiffs, to inquire whether Katz knew of any legitimate real estate
deals that would reduce Boesky’s tax liability. Id. at ¶ 25. Katz informed Boesky that he knew
of a strategy to take advantage of a legal loophole in the tax law, whereby Boesky could invest in
a limited liability company (LLC) for the sole purpose of purchasing and then donating a remainder interest in certain real estate (or a remainder interest in the rights to an entity that
directly or indirectly holds the real estate). The amount of the charitable deduction claimed
would be higher than the amount Boesky paid to acquire the remainder interest, thereby creating
a tax deduction offsetting most of the income realized by Boesky for that tax year. Id. at ~26.
This strategy is referred to in the complaint as the “remainder interest tax strategy”. Id.
At the behest of Katz, plaintiffs retained Katz’s close friend Levine, to provide them Vvith
legal advice and services concerning the remainder interest tax strategy, including fonning the
LLCs required to execute the strategy. Id. at ~27. In 2002, Levine and Herrick Feinstein began
providing legal advice and services to plaintiffs pursuant to oral agreements. See Comp. at 4128.
At the time, plaintiffs did not have a written engagement letter with Levine or Herrick Feinstein.
Id
Levine advised plaintiffs that the charitable deduction created by the remainder interest
tax strategy was legal and the “only legitimate way” to shelter income from taxation. Id. at ~~ 31-
32, Levine also told plaintiffs that a taxpayer utilizing the remainder interest tax strategy had
been audited by the Internal Revenue Service (IRS) and prevailed in the audit See id. at~- 34. In
addition, he told plaintiffs that the IRS had issued a letter ruling, or other position statement, that
the remainder interest tax strategy was a legitimate tax savings transaction. Id.”

“The first cause of action is for legal malpractice and is assessed against Levine, Herrick
Feinstein, and Moritt Hock. See Comp. iii! 172~185. Plaintiffs allege that these defendants
breached their duty to represent plaintiffs with such reasonable skill, care and diligence as
members of the legal profession commonly exercise in similar situations by: failing to implement
adequate controls to protect clients such as plaintiffs tram the intentional fraud and the negligent
misconduct of Levine; not doing anything to prevent Levine from marketing and promoting
unlawful tax shelters and in profiting from those acts; failing to apprise plaintiffs as additional
legal developments, rulings and decisions were issued by the IRS and the courts making it dear
the tax shelters they were prompting were not legitimate; and in continuing to provide flawed
and erroneous advice despite their continuing representation of plaintiffs through 2016. See id. at
¶s 74-18 l.

“Levine, Henick Feinstein, and Moritt Hock each contend that this cause of action is time~
barred. Plaintiffs have conceded that their malpractice claim insofar asserted  against Herrick
Feinstein is untimely. See Plaintiffs’ Memorandum of Law in Opposition to Defendant Herrick Feinstein’s Motion to Dismiss Complaint, at 8 n3. Therefore, the only remaining defendants
against whom this cause of action is asserted are Levine and Moritt Hock.”

“Here, the complaint does not allege that there was an “express, mutual agreement to advise” plaintiffs on the effect of the remainder interest tax strategy after Levine’s original advice. Apple Bank for Sav. v. PricewaterhouseCoopers LLP, 70 AD3d 438, 438 (1st Dept 2010); Johnson v. Proskauer Rose LLP, 129 A.D.3d 59, 68 (1st Dept 2015) (“while there was certainly the possibility that the need for future legal work would be required with respect to the tax strategy (promoted by the defendants), plaintiffs could not have ‘acutely’ anticipated the need for farther counsel from defendants that would trigger the continuous representation toil”). ”

“Here, the complaint alleges that plaintiffs received counsel from Levine between 2002 to
2004 regarding the tax strategy, However, it was not UIJ.til three years later, 1112007, that Levine
began to counsel them on the same subject matter — i.e., how to handle the IRS’s and NYSDTF’s
challenges to the strategy. This three-year gap between the provision of Levine’s services on this
matter is so great that the representation cannot be deemed continuous. See Landau v. Snow
Becker Krauss, P.C., 111 A.D.3d 795, 797 (2d Dept 2013) (stating “as evidenced by, inter aha,
the more than four-year period of time between the issuance of the opinion letter and the
plaintiffs alleged retention of the defendants in July 2007, during which no further legal
representation was undertaken with respect to the subject matter of the opinion letter, the parties
did not contemplate that any further representation was needed”). As such, any claims based
upon the advice rendered by Levine from 2002 through 2004 are untimely. ”

 

Collateral Estoppel and a Limited Retainer Rule Out Legal Malpractice Case

Posted in Legal Malpractice Cases

Pritisker v Zamansky, LLC  2018 NY Slip Op 32930(U)  November 19, 2018
Supreme Court, New York County Docket Number: 150595/2017 Judge: Frank P. Nervo  is the kind of legal malpractice case that legal malpractice insurers love.  It appears to be a one-off, or a pro-se case in which a checklist of the elements of legal malpractice have been overlooked, and in which prior litigation dooms the present case.

“While the court has not converted this motion into one for summary judgment, it will consider
the document plaintiff submits in opposition to the motion, his memorandum of law in order to
determine whether despite his pleading defect, he has a cause of action. ( see Guggenheimer v.
Ginzburg, id. at 275; Basis Yield Alpha Fund (Master) v. Goldman Sachs Group, Inc. 115 AD3d
128,135) The memorandum of law demonstrates that plaintiff cannot establish that his action
against AGLIC would have been successful. At page 26 of his memorandum of law, plaintiff
disputes the necessity of showing success in an action against AGLIC. He refers to any such
proof as “an empty boast.” This is an apparent concession that he has no cause of action.
Therefore, dismissal is required under CPLR 3211(a)(7).

The branch of defendants’ motion to dismiss the complaint pursuant to 3211 (a)(l) is also
granted. Defendants submit the arbitration decision denying his claim against the non-AG UC
parties. The decision shows that plaintiff made all his own investment decisions. That decision
has never been reversed and conclusively shows that plaintiff himself caused his own alleged
injury. This decision conclusively and unequivocally establishes defendants’ defense as a matter
of law. ( Warshaw Bernstein Cohen Schlesinger & Kuh, LLP v. Longmire, 106 AD3d 536, 537)
Similarly, the Second Circuit decision, albeit in dicta, that defendants submit shows that
plaintiff himself made his own investment choices and so was not influenced by AGLIC in any
manner. In addition to the decisions, the retainer agreement between plaintiff and defendants
shows that defendants representation was limited to an arbitration between plaintiff and two
other parties. Plaintiff agreed that defendants would not pursue a claim against any other party or entity. The retainer agreement precludes an action against defendants for failure to sue AGLIC. (see Hallman v. Kantor, 72 AD3d 895)

Plaintiff’s causes of action for negligence and breach of fiduciary duty are dismissed because
they are duplicative of the legal malpractice action ( Cohen v. Kachroo, id. at 513), and because,
as with the deficiency in the legal malpractice pleading, they fail to plead the facts necessary to
support them. “

Contribution, Perhaps; But No Indemnity

Posted in Legal Malpractice Cases

Third-party practice between professionals is a major part of legal malpractice litigation.  Here, the defendant attorneys point the finger at accountants and argue that mistakes in the tax filings caused the damage of which they are accused.

Rubin v Duncan  2018 NY Slip Op 32934(U)  November 16, 2018  Supreme Court, New York County Docket Number: 154131/2015 Judge: Paul A. Goetz  discusses how the relationship between the attorney and the accountant might play out.

“Plaintiffs commenced the underlying malpractice action against defendants Duncan, Fish & Vogel LLP and one of_its principals, Richard E. Fish, seeking to recover damages for defendants’ alleged negligent representation of plaintiffs in litigation with Ace Investor LLC in Utah and the subsequent judgment enforcement and turnover proceedings brought by Ace in Utah and in the Southern District of New York.  The defendants thereafter filed a motion to dismiss the complaint, which was granted in part by the court. On appeal of this decision as well as the motions to reargue, the First Department held that the Marital Trust was the only plaintiff which had standing to assert the claims in the underlying malpractice action. The First·Department also dismissed the claims of the sole remaining plaintiff, the Marital Trust, except to the extent that the Marital Trust’s claims were based on: (1) the defendants’ alleged failure to obtain credit for the $200,000 plaintiffs paid against the note with Ace; (2) the deposition advice given to Margery Rubin; and (3) the legal fees incurred by plaintiff and its loss of any source of repayment of its loans to the other plaintiffs. Affirmation of Todd Belous dated May 14, 2018, Exh. E. ”

“Subsequently, defendants commenced a third-party action against the third-party defendants, who
provided accounting services to the trusts. Specifically, defendants/third-party plaintiffs alleged that the third-party defendants negligently prepared certain tax returns for one or more of the trusts and that the court relied on these erroneous tax returns in entering a judgment against the Marital Trust in the turnover proceeding. Belous Aff., Exh. G, mf 34-35. Accordingly, defendants/third-party plaintiffs asserted claims against third-party defendants based on contribution and indemnification. ”

“In their papers, third-party defendants fail to distinguish this case from the facts in Millennium. Although the third-party defendants in this case are accountants, and not lawyers, this distinction is not meaningful here as both accountants and lawyers can be held liable for malpractice. Third-party defendants also argue that unlike in Millennium, the third-party defendants provided independent accounting advice to the trusts and did not participate concurrently or successively with the defendants in connection with the claims asserted in.plaintiffs legal malpractice action. However, under CPLR 1401, a defendant may assert a claim for contribution against not only a joint tortfeasor, but also against “concurrent, successive, independent, alternative and even intentional tortfeasors.” Schauer v. Joyce, 54 N.Y.2d 1, 5 (1981) (emphasis added; internal citations and quotations omitted). The right to contribution exists among persons who are subject to liability in tort for the same injury, which is exactly what defendants/third party plaintiffs have alleged in their third-party complaint. Further, defendants’ affirmative defense of comparative fault against plaintiffs and their agents may not be sufficient to protect them against the alleged malfeasance of the third-party defendants. The affirmative defense was asserted prior to First Department’s decision dismissing all of the plaintiffs with the exception of the Marital Trust. According to defendants, the third-party defendants were retained by the now-dismissed plaintiff Robert M. Rubin to render accounting services, including preparing tax returns for the trusts. Thus, the remaining plaintiff may argue that the third-party defendants were not its agents since it did not retain them to provide accounting services. ”

“Moreover, the third-party defendants were not employees of the plaintiffs but rather were hired as
independent accountants, who were not subject to plaintiffs’ actual direction and control. See Feliberty v. Damon, 72 N.Y .2d 112, 118 (1988) (holding that insurer which retained outside counsel could not be held vicariously liable for law firm’s actions since the firm was an independent contractor which was not subject to the insurer’s actual direction and control). Thus, it is uncertain whether the actions of the third party defendants can in fact be imputed to the remaining plaintiff, and whether the remaining plaintiff can assert a viable defense to such a claim. Cf Arbor Realty Funding, LLC v. Herrick, Feinstain LLP, 2018 WL 163 8817 (Sup. Ct. N. Y. Cty. 2018) (distinguishing Millennium and relying on Hercules to dismiss third-party contribution claim where plaintiff in its motion papers acknowledged responsibility for the actions of the third-party defendants). Accordingly, the cause of action for contribution cannot be dismissed.
With respect to the third-party indemnification claim, it is well-established that “[t]he predicate for
common-law indemnity is vicarious liability without fault on the part of the proposed indemnitee, and it follows that a party who has itself participated to some degree in the wrongdoing cannot receive the benefit of the doctrine.” Kagan v. Jacobs, 260 A.D.2d 442, 442 (2d Dep’t 1999). Here, since the defendants/third-party plaintiffs actually participated to some degree in the alleged wrongdoing, they cannot claim indemnification. Id Accordingly, this cause of action must be dismissed. “

Doctor v. Doctor Suit Morphs into Doctor v. Lawyer Suit

Posted in Legal Malpractice Cases

Brooklyn Med. Eye Assoc., LLC. v Rivkin Radler LLP, 
.2018 NY Slip Op 32913(U)  November 13, 2018 Supreme Court, Kings County Docket Number: 505978/18 Judge: Leon Ruchelsman is an example of what happens when a doctor to doctor business sale goes wrong.

“At the end of 2012 an entity called Craniofacial Surgery P.C., owned by Dr. Dominick Golio entered into a purchase· agreement to buy Brooklyn Medical Eye Associates, LLC [hereinafter ‘BMEA’] owned by Dr. George Hyman. Dr. Golio.   He executed a personal guaranty guaranteeing all the payments due to Dr. Hyman. Pursuant to a promissory note the first payment due to Hyman was not made and thereafter Dr. Hyman sued Dr. Golio in Nassau County and Dr. Golio was represented by defendant Rivkin Radler LLP in that action. Dr. Hyman moved seeking summary judgement in lieu of a complaint, however, such motion was denied on the grounds there were questions whether Dr. Hyman failed to transfer patients to BMEA pursuant to the agreement. Likewise, a motion to reargue was similarly denied. In a decision and order dated October 30, 2015 the Appellate Division reversed that determination holding that “the plaintiff established, upon reargument, his prima facie entitlement to judgement as a matter of law by proving the existence of a guaranty, the underlying debt, and the guarantor’s failure to perform under the guaranty” (id). The Appellate Division rejected the argument any unfulfilled obligations absolved the guarantor stating that “by
the plain language of the guaranty, the defendant was precluded from raising any defenses or counterclaims relating to the underlying debt” (id). Following that decision a judgement was
entered against Dr. Golio. ”

“The crux of plaintiff’s malpractice claim in this regard is that the defendants failed to, argue that additionally Dr. Hyman was actively soliciting BMEA’s patients in further violation of the purchase agreement. Stated simply, the plaintiff argues the defendant failed to argue additional breaches of the agreement by Hyman. However, the Appellate Division rejected the allegation Hyman’s failure to deliver the patient lists exempted Golio from making payment under the guaranty. This was based upon the legal principle, expressed by the Appellate Division, that the guaranty “is a
separate undertaking and a self-standing document … and properly served as the predicate for the plaintiff’s motion for summary judgement in lieu of complaint” (supra). The Appellate Division
further explained that “by its plain terms, and its broad, sweeping, and unequivocal language, the defendant’s guaranty forecloses any challenge to the enforceability and validity of the promissory note made by nonparty Craniofacial Surgery P.C.” and that “by the plain language of the guaranty, the defendant was precluded from raising any defenses or counterclaims relating to the underlying debt” (supra). Thus, the Appellate Division has unequivocally explained that there are no defenses that would have excused Golio from making payments under the guaranty. Thus, Golio has failed to present any basis that the defendant’s failure to present this specific argument would have resulted in a different conclusion. On the contrary, it is clear that no argument would have prevailed absolving Golio of his obligations under the guaranty. Golio argues that §9.2 of the purchase
agreement, a set-off provision would have surely entitled Golio to offset the amount owed due to Hyman’s breaches. However,  Hyman’s breaches of which the Appellate Division was aware and of
which arguments were presented were also sufficient to violate the restrictive covenants. Nevertheless, the Appellate Division ruled that no defenses to the guaranty were available. This
position likewise governs the actual solicitation allegedly committed by Hyman. Consequently, the third cause of action is hereby dismissed. “

How To Calculate the Statute of Limitations

Posted in Legal Malpractice Cases

Lopez v Lozner & Mastropietro, P.C.    2018 NY Slip Op 08017  Decided on November 21, 2018 Appellate Division, Second Department is a text-book lesson in how to calculate the legal malpractice statute of limitations in a motor-vehicle case where no case was started.  It is three years from the date of the motor-vehicle accident plus three years.

“In an action, inter alia, to recover damages for legal malpractice, the plaintiff appeals from an order of the Supreme Court, Kings County (Loren Baily-Schiffman, J.), dated May 4, 2017. The order, insofar as appealed from, granted that branch of the defendants’ motion which was pursuant to CPLR 3211(a)(7) to dismiss the cause of action alleging legal malpractice.

ORDERED that the order is reversed insofar as appealed from, on the law, with costs, and that branch of the defendants’ motion which was pursuant to CPLR 3211(a)(7) to dismiss the cause of action alleging legal malpractice is denied.

On November 4, 2011, the plaintiff, a pedestrian, allegedly was injured when he was struck by a motor vehicle. Thereafter, the plaintiff retained the defendant law firm, Lozner & Mastropietro, P.C. (hereinafter the law firm), to represent him in connection with the accident, and the law firm commenced an action on behalf of the plaintiff against the operator of the vehicle. In January 2017, the plaintiff commenced this action against the law firm and two of its principals, inter alia, to recover damages for legal malpractice. The plaintiff alleged that the driver of the offending vehicle was working for Domino’s Pizza, LLC (hereinafter Domino’s), making a pizza delivery at the time of the subject accident, and that the defendants were negligent in failing to timely commence an action against Dominos. The defendants moved pursuant to CPLR 3211(a) to dismiss the complaint. In the order appealed from, the Supreme Court, inter alia, granted that branch of the defendants’ motion which was pursuant to CPLR 3211(a)(7) to dismiss the first cause of action to recover damages for legal malpractice.”

“Here, accepting the facts alleged in the complaint as true, and according the plaintiff the benefit of every possible favorable inference, the plaintiff stated a cause of action to recover damages for legal malpractice (see Tooma v Grossbarth, 121 AD3d at 1095-1096; Endless Ocean, LLC v Twomey, Latham, Shea, Kelley, Dubin & Quartararo, 113 AD3d 587, 589; Reynolds v Picciano, 29 AD2d 1012, 1012). The evidentiary submissions did not establish that a material fact alleged in the complaint is not a fact at all and that no significant dispute exists regarding it (see Bodden v Kean, 86 AD3d at 526). Contrary to the defendants’ contention, the plaintiff was entitled to commence this legal malpractice action even though the underlying personal injury action was still pending, as the legal malpractice action accrued, at the latest, in November 2014 (see Johnston v Raskin, 193 AD2d 786, 787).”

A Most Unusual Assignment

Posted in Legal Malpractice Cases

In a fight of first impression, Defendant is battling to keep plaintiff from taking over defendant’s potential legal malpractice case against his attorney.  In this case, it seems that the Defendant and the attorney are childhood friends, and that Defendant would do almost anything (except pay plaintive) to protect the attorney.  What loyalty!

Borges v Placeres  2018 NY Slip Op 51622(U) Decided on November 2, 2018 Civil Court Of The City Of New York, New York County Ramseur, J. is unique in that one of the parties (not a lawyer-party)  is trying to keep a legal malpractice case from commencing.

“Plaintiff/Judgment Creditor Jose Borges moved, pursuant to CPLR 5225 and 5240, to compel assignment of Defendant/Judgment Debtor Alfred Placeres’s potential legal malpractice claim against Defendant’s friend and former attorney to satisfy Plaintiff’s judgment (motion sequence 023). In a June 27, 2018 decision and order, (Borges v Placeres, 60 Misc 3d 1033 [Civ Ct NY County 2018], the “Order”), the Court granted the motion and compelled assignment of the claim. Defendant now moves by order to show cause: (1) pursuant to CPLR 5015(a)(4), to vacate the Order nunc pro tunc for lack of jurisdiction; pursuant to CPLR 2221(d), to reargue the Order; and (3) for an order directing Plaintiff to withdraw the action commenced as assignee (mot seq 024). As detailed below, reargument is granted, and the Court adheres to its original determination.”

“Similarly, where property value is not only unclear but arguably ummarketable, thus rendering it “unlikely that a turnover to the sheriff would result in satisfying the judgment,” courts have also directed turnover to a receiver to do any act “designed to satisfy the judgment” (see CPLR 5228; Udel v Udel, 82 Misc 2d 882, 884 [Civ Ct NY County 1975] [on motion of creditor, appointing receiver “to do any act designed to satisfy the judgment, including dissolution of the corporation as provided in section 1511 and section 1001 of the Business Corporation Law”]; accord Hotel 71 Mezz Lender LLC v Falor, 14 NY3d 303, 317 [2010] [“A receivership has been held especially appropriate when the property interest involved is intangible, lacks a ready market, and presents nothing that a sheriff can work with at an auction, such as the interest of a psychiatrist/judgment debtor in a professional corporation of which he is a member.”]). Moreover, the Court has “broad supervisory powers over the sheriff in conjunction with the enforcement of judgments,” including the power to “direct the sheriff to dispose of, account for, assign, return or release all or any part of any property or debt, or the proceeds thereof” (Siegel/Reilly, Practice Commentaries, CPLR 5238 C5238:1 [emphasis added] [“The list of verbs contained in CPLR 5238—dispose of, account for, assign, return, release, and in respect of both the property and the proceeds—is in this respect illustrative and not exclusive.”]; New York City Civil Court Act § 701; see also CPLR 5233[c] [“The court may direct immediate sale or other disposition of property with or without notice if the urgency of the case requires.”] [emphasis added]).Here, principles of equity favor direct assignment of the legal malpractice claim to Plaintiff. First, the value of the claim is unclear, and thus may garner no bids of value at a sheriff’s auction. Indeed, Defendant has argued vehemently, in the original motion and here, that the claim is worthless and urges the Court to order a sheriff’s sale to permit the public, including Defendant, to engage in a valueless, time-consuming formality. Second, multiple courts have noted Defendant’s obstruction of Plaintiff’s efforts to pursue the judgment, particularly in relation to Defendant’s only confirmed asset of potential value: the malpractice claim (see Order at 2). As recently as this Order to Show Cause, Defendant has stated — notably for the first time — that a sheriff’s sale would afford the opportunity to “consider trying to borrow money (if he could) and buy [the malpractice cause(s) of action] for himself in order to protect his former attorneys [*4](including a childhood friend) from frivolous and legally-baseless claims” (Def Memo at 16). In other words, Defendant disingenuously seeks another opportunity to continue to frustrate Plaintiff’s collection efforts. Principles of equity, judicial economy, and public policy counsel against that outcome.”

Accordingly, it is hereby

ORDERED that Defendant’s motion to vacate and reargue (motion sequence 024) is GRANTED solely to the extent that the branch of Defendant’s motion seeking reargument on the issue of whether the Court erred in assigning the potential malpractice cause of action directly to Plaintiff rather than directing a turnover to the sheriff is GRANTED; and it is further

ORDERED that upon reargument, the Court adheres to its original determination; and it is further

ORDERED that all other branches of Defendant’s motion are DENIED; and it is further

ORDERED that, within 10 days of receipt, Plaintiff shall serve this order with notice of entry upon all Defendants.

This constitutes the decision and order of the Court.”

A Very Big Credit Mess, But No Deceit

Posted in Legal Malpractice Cases

Judge Ruchelsman spends time peeling back the onion layers in Woodcock v Birnbaum
2018 NY Slip Op 32841(U) November 7, 2018 Supreme Court, Kings County Docket Number: 507014/18 to come to the decision on whether there was a violation of Judiciary Law § 487.  Eventually, he finds that arguments were insufficient, but not deceitful.

“During the fall of 2011 the plaintiff and Ingo Nowottny incorporated an entity called Century First Credit Solutions lnc . , [hereinafter ‘ CFCS’) and each was a fifty percent owner of that entity . On December 22 , 20 11  Ingo Nowottny formed nominal defendant United Credit Solutions, Inc . , [hereinafter ‘ UCS ‘ ) . On March 1 , 2012 Woodcock purchased half the shares of UCS and thus
became equal shareholders in both corporat i ons . On November 6, 2014 Nowottny ‘ s sister formed another entity, the similarly called United Credit Solvers, Inc ., and then entered into an agreement to purchase some of the assets and book of business of UCS . The relationship between Nowo ttny and Woodcock soured and Woodcock formed another entity Named Priority Capital LLC to
compete with Nowottny without Nowottny ‘ s ownership interests.

Indeed, both Nowottny and Woodcock accused the other of stealing proprietary information from their joint corporations and utilizing the information in their wholly owned corporations. First , on August 25 , 2015 Woodcock through counsel sent Nowottny  a cease and desist letter accusing Nowottny of representing to clients that United Credit Solvers is really UCS and demanding
Nowottny discontinue this activity. A few days later a lawsuit was filed in an action entitled Century First Credit Solutions Inc. , v . Priority Capital LLC , Christian Woodcock and John Amato ,
Index Number 653287/2015 in New York County . In that action , the plaintiff Century First Credit Solutions Inc . , owned by Nowottny, sued Woodcock, alleging he misappropriated trade secrets,
converted corporate funds and tortuously interfered with contractual relations, among other claims.  Specifically , the complaint alleged Woodcock and John Amato , a former  sales representative and independnt contractor of CFCS , formed Priority Capital LLC and utilized the information misappropriated in the new entity . Woodcock filed a third party complaint against Nowottny and his brother William Nowottny alleging they interfered with Priority and actually fraudulently represented themselves as employees of Priority to steal Priority’ s business
for their own businesses. ”

“Lastly, concerning Judiciary Law §487, it is well settled that to establish such a cause of action the plaintiff must present evidence an attorney acted “with intent to deceive” either the court or any party (see, Moormann v. Perini Hoerger, 65 AD3d 1106, 886 NYS2d 49 [2d Dept . , 2009]). The allegations concerning the deception must be pled with particularity (Betz v . Blatt, 160 AD3d 696 , 74 NYS3d 75 [2d Dept ., 2018]).

First, it must be noted that the Second Department no longer maintains a cause of action pursuant to Judiciary Law §487 based upon an attorney’s egregious, extreme or chronic delinquent activities. Rather, “the only liability standard recognized in Judiciary Law §487 is that of an intent to deceive” (Dupree v . Vorhees, 102 AD3d 912 , 959 NYS2d 235 [2d Dept. , 2013]) .

Second, considering the intent to deceive, such intent can hardly be demonstrated . Indeed, GM acknowledged to the court as well as to the plaintiff that such representation was being undertaken . In Judge Bannon’ s decision dated January 25 , 2017, she noted that in opposition to the motion to disqualify the plaintiff there, CFCS argued that “Woodcock is only a former client of Greenspoon Marder, that any representation of Woodcock in Florida was only provided in connection with Woodcock role as a 50% owner of Century, that personal representation of Woodcock by Greenspoon Marder in Florida , if any, was not substantially related to the instant matter” (supra). Thus, GM ‘ s representation in the New York matter was not ‘ deceptive ‘ in any manner, rather, GM simply argued the representation was not legally proscribed. While they failed to prevail upon such argument , which comprises the causes of action as noted, they did not engage in any decept ion or any deceptive practices.

Therefore , the motions seeking to dismiss t he claims based upon Judiciary Law §487 are hereby granted . “

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