In D’Adamo v Cohen 2024 NY Slip Op 05956 Decided on November 27, 2024
Appellate Division, Second Department a legal malpractice case was dismissed because the allegations were too “conclusory,”

“In an action, inter alia, to recover damages for legal malpractice, the plaintiffs appeal from an order of the Supreme Court, Westchester County (Alexandra D. Murphy, J.), dated July 27, 2022. The order, insofar as appealed from, granted that branch of the defendants’ motion which was pursuant to CPLR 3211(a) to dismiss the cause of action alleging legal malpractice.

ORDERED that the order is affirmed insofar as appealed from, with costs.”

“A plaintiff must plead “actual, ascertainable damages as a result of an attorney’s negligence. Mere speculation about a loss resulting from an attorney’s alleged omission is insufficient to sustain a prima facie case of legal malpractice” (Dempster v Liotti, 86 AD3d at 177 [citation, alterations, and internal quotation marks omitted]; see Philip S. Schwartzman, Inc. v Pliskin, Rubano, Baum & Vitulli, 215 AD3d 699, 703). “Conclusory allegations of damages or injuries predicated on speculation cannot suffice for a malpractice action, and dismissal is warranted where the allegations in the complaint are merely conclusory and speculative” (Alexim Holdings, LLC v McAuliffe, 221 AD3d 641, 643 [internal quotation marks omitted]; see York v Frank, 209 AD3d 804, 807).

Here, the Supreme Court properly granted that branch of the defendants’ motion which was to dismiss the cause of action alleging legal malpractice. The plaintiffs’ claims regarding the consequences and damages flowing from the defendants’ alleged failure to request that a title company provide a title report by a certain date are conclusory and speculative (see May Dock Lane, LLC v Harras Bloom & Archer, LLP, 222 AD3d at 637; 126 Main St., LLC v Kriegsman, 218 AD3d 524, 525; Sierra Holdings, LLC v Phillips, Weiner, Quinn, Artura & Cox, 112 AD3d 909, 910).”

In a relatively rare reversal of Supreme Court’s CPLR 3101 dismissal of a legal malpractice case, the Appellate Division, Second Department reversed and remanded Kowalski v Gold Benes, LLP 2024 NY Slip Op 05967 Decided on November 27, 2024.

“The plaintiffs commenced this action to recover damages for legal malpractice against the defendants. The plaintiffs alleged, among other things, that they retained the defendants to represent them in an action to recover damages for personal injuries the plaintiff Colin D. Kowalski allegedly sustained in a motor vehicle accident (hereinafter the underlying action) and that due to the defendants’ failures to pursue a theory based on a violation of Vehicle and Traffic Law § 509(3), the plaintiffs were not able to obtain a verdict in their favor in the underlying action. The defendants moved pursuant to CPLR 3211(a) to dismiss the complaint. In an order entered May 25, 2022, the Supreme Court granted the defendants’ motion. The plaintiffs appeal.’

“To state a cause of action to recover damages for legal malpractice, “a plaintiff must allege that the attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession and that the attorney’s breach of this duty proximately [*2]caused plaintiff to sustain actual and ascertainable damages” (Lam v Weiss, 219 AD3d 713, 716 [alterations and internal quotation marks omitted]; see Marinelli v Sullivan Papain Block McGrath & Cannavo, P.C., 205 AD3d at 716). “To establish causation, a plaintiff must show that he or she would have prevailed in the underlying action or would not have incurred any damages but for the attorney’s negligence” (Mackey Reed Elec., Inc. v Morrone & Assoc., P.C., 125 AD3d 822, 823; see Lam v Weiss, 219 AD3d at 716). “A plaintiff is not obligated to show, on a motion to dismiss, that it actually sustained damages” (Mackey Reed Elec., Inc. v Morrone & Assoc., P.C., 125 AD3d at 823). “Whether the complaint will later survive a motion for summary judgment, or whether the plaintiff will ultimately be able to prove its claims, of course, plays no part in the determination of a prediscovery CPLR 3211 motion to dismiss” (Churong Liu v Gabbay, 219 AD3d 459, 460 [internal quotation marks omitted]; see Maursky v Latham, 219 AD3d 473, 474-475).

Here, the Supreme Court erred in granting dismissal of the complaint pursuant to CPLR 3211(a)(7). Accepting the allegations in the complaint as true and according the plaintiffs the benefit of every possible favorable inference, the complaint states a cause of action for legal malpractice (see Ofman v Tenenbaum Berger & Shivers, LLP, 217 AD3d 960, 962). In the underlying action, the jury found that the non-settling defendant was not negligent. There is no dispute that the defendants herein did not present any evidence to support a negligence per se theory.

Accordingly, the Supreme Court should have denied the defendants’ motion pursuant to CPLR 3211(a) to dismiss the complaint.”

In Grasso v Guarino 2024 NY Slip Op 02692 [227 AD3d 872] May 15, 2024 Appellate Division, Second Department, even allegations that the law firm falsely stated that plaintiff had been sanctioned and a claimed deceitful representation that there were no client notes is insufficient. Note all the elements of Judiciary Law 487 recited by the AD. None of these explicitly are found in the statute.

“In 2011, the defendant represented the Town of Babylon in an action (hereinafter the 2011 action) commenced in the District Court, Suffolk County, against the plaintiff, alleging violations of the Town Code. In November 2017, the plaintiff commenced this action against the defendant individually and in his capacity as principal owner of Law Offices of Jerry C. Guarino, P.C. The plaintiff asserted causes of action alleging a violation of Judiciary Law § 487, fraud, and intentional infliction of emotional distress. The basis for the plaintiff’s allegations was the defendant’s conduct in the 2011 action, consisting of, inter alia, an alleged deceitful representation by the defendant in response to the plaintiff’s discovery demands, wherein the defendant represented that there were no notes taken by Town employees related to the plaintiff’s alleged violations of the Town Code, and the defendant’s alleged deceitful statement in a letter to the District Court, asserting that the plaintiff’s counsel had been sanctioned when the defendant should have known that those sanctions had been vacated. The defendant moved pursuant to CPLR 3211 (a) to dismiss the amended complaint. In an order dated March 7, 2022, the Supreme Court granted the motion. The plaintiff appeals.”

“A cause of action alleging a violation of Judiciary Law § 487 “requires, among other things, an act of deceit by an attorney, with intent to deceive the court or any party” (Shaffer v Gilberg, 125 AD3d 632, 636 [2015] [internal quotation marks omitted]; see Cordell Marble Falls, LLC v Kelly, 191 AD3d 760, 762 [2021]). “ '[V]iolation of Judiciary Law § 487 requires an intent to deceive’ as [*2]
opposed to conduct which is negligent” (Cordell Marble Falls, LLC v Kelly, 191 AD3d at 762 [citation omitted], quoting Moormann v Perini & Hoerger, 65 AD3d 1106, 1108 [2009]). “Relief pursuant to Judiciary Law § 487 is not lightly given, and requires a showing of egregious conduct or a chronic and extreme pattern of behavior on the part of the defendant attorneys” (Kaufman v Moritt Hock & Hamroff, LLP, 192 AD3d 1092, 1093 [2021] [citation and internal quotation marks omitted]). “A cause of action alleging a violation of Judiciary Law § 487 must be pleaded with specificity” (id. [internal quotation marks omitted]). Here, even accepting the allegations in the amended complaint as true and according the plaintiff the benefit of every possible favorable inference, the amended complaint did not allege conduct that is actionable under Judiciary Law § 487 (see Kaufman v Moritt Hock & Hamroff, LLP, 192 AD3d at 1093).”

Lutin v Perlberger 2024 NY Slip Op 31879(U) May 29, 2024 Supreme Court, New York County Docket Number: Index No. 158734/2023 Judge: Dakota D. Ramseur discusses how a plaintiff might claim “extortion” when it really means “harassment” and how “forged” documents might not be enough for a Judiciary Law 487 claim.

“Pro se plaintiff, Gary Lutin (plaintiff), commenced this action for extortion, fraud, and pursuant to Judiciary Law§ 487, against defendants, Ralph Perlberger, the Law Offices of Ralph Perlberger (collectively, the Perlberger defendants), Eric P. Schutzer (Schutzer) and The Schutzer Group, PLLC (collectively, the Schutzer defendants), stemming from Perlberger’s representation of plaintiff in another matter and the Schutzer defendants’ efforts to collect fees from plaitniff due to Perl berger. The Schutzer defendants now move pursuant to CPLR 321 l(a)(l), (5) and (7) to dismiss the complaint. The motion is opposed. For the following reasons, the motion is granted. As relevant to the instant motion, on July 2, 2001, the New York City Civil Court granted Perlberger a $37,043.75 money judgment against plaitniff in the action entitled Perlberger v Lutin, Index No. TS 1781-00/NY (the 2001 Judgment). The 2001 Judgment covered fees plaintiff owed the Perlberger defendants for legal services rendered in two commercial litigations: Lutin v New Jersey Steel Corporation, et al. and D.S. Atkinson, Inc. v Lutin Central Services Co., Inc. The Civil Court simultaneously dismissed plaintiffs counterclaims against the Perl berger defendants for legal malpractice in those matters. On May 24, 2018, Perlberger commenced an action in Supreme Court, New York County entitled Perlberger v Lu tin, Index No. 154885/2018, by the filing of a summons and motion for summary judgment in lieu of complaint, seeking to renew the 2001 Judgment (the Renewal Action). By order dated August 13, 2018, another justice of this court granted Perlberger’ s motion over plaintiffs opposition and directed the parties to settle an order on notice. On June 5, 2019, the County Clerk entered the renewal judgment against plaintiff in the amount of $97.594.11 (Renewal Judgment). On February 25, 2020, plaintiff filed a motion to vacate the Renewal Judgment for lack of jurisdiction. On April 27, 2020, another justice of this court denied the motion. Prior to July 9, 2019, Perlberger retained Schutzer to represent him in connection with efforts to collect the duly entered Renewal Judgment. On July 9, 2019, Schutzer served plaintiff with a copy of the Renewal Judgment and notice of entry, together with a notice to judgment debtor, a restraining notice and an information subpoena (NYSCEF doc. no. 38 at ,r,r 35-36, ex 13 ). Schutzer then emailed the documents to plaintiff on July 30, 2019. On December 6, 2019, Schutzer commenced a special proceeding on behalf of Perlberger in Supreme Court, New York County, entitled Perlberger v Lutin, Index no. 161842/2019, seeking to compel plaintiff and others to respond to outstanding information subpoenas and to impose sanctions. On December 28, 2020, another justice of this court denied both the Petition and plaintiffs cross-motion. On March 16, 2022, Schutzer served a new subpoena for documents and testimony on plaintiff via NYSCEF in the Renewal Action. On May 11, 2022, Schutzer served a new subpoena duces tecum and ad testificandum on plaintiff via NYSCEF in the Renewal Action. On November 16, 2022, Schutzer filed a motion in the Renewal Action seeking to hold plaintiff in contempt for disobeying the May 2022 Subpoena and to compel him to comply therewith. On May 24, 2023, another justice of this court denied the motion for contempt. Plaintiffs complaint alleges that the Schutzer defendants attempted to extort plaitniff with forged records. Plaintiff primarily alleges that the Schutzer defendants used forged documents in the various actions pending before the court, claiming that: “[t]he set of papers were falsely presented as filings in the case of the 2018 Renewal Action, including what appeared to be a Notice of Entry captioned for the Supreme Court of the State of New York, New York County in the case Perlberger v. Lutin, Index No. 154885/2018, dated 7/9/2019 and signed by Eric P. Schutzer on behalf of the Schutzer Group PL as ‘Attorneys for Plaintiff,’ accompanied by similarly captioned and Schutzer-signed papers captioned as a ‘Notice to Judgment Debtor or Obligor’ and a ‘Restraining Notice.”‘

“Here, plaintiff fails to plead facts stating a claim for both “fraud on the court” and under Judiciary Law§ 487. Plaintiff essentially alleges that the Schutzer defendants falsely claimed they filed certain documents as part of the Renewal Action, and that those statements resulted “[i]n the improper impositions of costs and burdens not only on Plaintiff and the court but also on non-party organizations” and further that the court in the Renewal Action did not “hear evidence of a previous settlement of Perl berger’ s claims.” However, plaitniff fails to allege a deception as to material facts, the Schutzer defendants’ intention to deceive, “[o]r that that [plaintiff] suffered damages that were proximately caused by the alleged deceit” (id. at 776). Again, plaintiff requests that: “If the Complaint does not satisfy the pleading requirements established by that case, or by other relevant cases, Plaintiff requests the Court’s direction to amend the Complaint accordingly.” As discussed in the preceding section, plaitniff failed to provide any factual basis to support his request for leave to amend the complaint, and thus, the request is denied (see JP Morgan Chase Bank, NA. at 582). Accordingly, as plaitniff failed to plead facts suggesting that the Schutzer defendants intentionally deceived plaintiff or the Court or any damages flowing therefrom, plaintiff s claims for “fraud on the court” and under Judiciary Law § 487 are dismissed.”

Earlier this week we looked at Lateral Inv. Mgt., LLC v Marcum, LLP 2024 NY Slip Op 33865(U) October 29, 2024 Supreme Court, New York County Docket Number: Index No. 154273/2023 Judge: Joel M. Cohen for a discussion of the statute of limitations for accounting malpractice claims. Today we look at the in pari delicto argument and the Court’s decision.

“According to the Complaint, the factual allegations of which are assumed to be true for purposes of this motion, Marcum was FTE’s “long-standing auditor[]” (NYSCEF 47 iJiJ 5, 60). The relationship was far reaching, and “had impacts on their relationship with several other of [Marcum’s] significant institutional clients” due to their relationship with a former Board Member of FTE, Luisa Ingargiola (id ,i,i 64, 66). Plaintiffs allege that these relationships motivated Marcum and Markowitz to engage effectively in a cover-up of misconduct by FTE’s CEO and CFO (id ,i 67). The Complaint states that “Ingargiola was one of-if not the onlyBoard member who had any idea” about an improper scheme by Lethem and Palleschi to issue undisclosed convertible notes (id ,i,i 56, 70). Furthermore, Plaintiffs allege “Defendants directly participated in Palleschi and Lethem’s embezzlement and conversion of Company funds as Palleschi and Lethem would convey trips, gifts and other perks to Markowitz in exchange for his willingness to participate in the fraud against FTE” (id ,i 145). In July 2015, in contemplation of a financing arrangement with FTE, plaintiffs Lateral Investment Management, LLC (“Lateral Investment”), Lateral JusCom Feeder, LLC (“JusCom”), and Lateral Recovery, LLC (“Lateral Recovery”) (collectively, “Lateral”) sought to review Marcum’s files on FTE for fiscal year 2014 (NYSCEF 47 iJiJ 49, 368). Marcum agreed to provide access to their work papers (NYSCEF 35). On October 28, 2015, Lateral entered into a Credit Agreement under which Lateral would provide more than $50 million in financing to FTE over time, in part relying on the work papers (NYSCEF 47 iJiJ 44, 51). The Credit Agreement was secured by an interest in FTE’ s assets (id). From 2016 to 2018, Lethem and Palleschi purportedly “embezzled millions of corporate funds for personal use and enjoyment through a variety of schemes” (id ,i 83). Plaintiffs claim “[t]his conduct was completely outside the scope” of their employment and that they “had totally abandoned the interests of the Company” (id ,i 84). The two also “fraudulently inflated FTE’s revenue” between 2016 and 2018, reporting more than $12 million for non-existent work (id ,i,i 104; 216-19). Despite “identify[ing] this revenue as being wholly unsupported,” Marcum and Markowitz purportedly “performed no further investigations … and rubber-stamped FTE’s filings during the relevant years” (id ,i 107). With reference to the absence of documentation of these revenues, Markowitz noted in an email to Palleschi that “I am the only one keeping you out of jail” (id ,i 229; NYSCEF 50). (Defendants, not surprisingly, strongly disagree with the adverse inferences Plaintiffs draw from this communication, but that dispute cannot be resolved on a motion to dismiss.) Marcum purportedly obtained “actual evidence of undisclosed or improperly disclosed related party transactions involving Palleschi,” and “helped conceal and/or turned a blind eye to” any evidence of misconduct (NYSCEF 47 iJiJ 86-87). Defendants “issued unqualified opinions and approved FTE’ s public filings” over that period and “wholly omitted any information” about the various schemes perpetrated by the FTE’s former executives (id ,i,i 93, 95, 107; 220-28).”

“The doctrine of in pari delicto “mandates that the courts will not intercede to resolve a dispute between two wrongdoers” (Kirschner v KPMG LLP, 15 NY3d 446, 464 [2010]). “Traditional agency principles play an important role in an in pari delicto analysis” (id at 465). Presumptively, “[a] corporation must … be responsible for the acts of its authorized agents even if particular acts were unauthorized” (id). However, under the “adverse interest” exception, where the agent has “‘totally abandoned his principal’s interests and … act[ed] entirely for his own or another’s purposes,” such acts are not imputed to the corporation (id at 466 [quoting Center v Hampton Affiliates, 66 NY2d 782, 784-85 [1985]]). Thus, in the corporate context, in pari delicto does not operate to bar a claim by the corporation if the corporate wrongdoers had totally abandoned the corporation’s interests (see id). In these scenarios, the “fraud is committed against a corporation rather than on its behalf’ (id at 467). In other words, applying the adverse interest exception requires that “the scheme that benefitted the insider operated at the corporation’s expense” (id 467-68). In applying Kirschner, the First Department has held that “the mere continuation of a corporate entity does not per se constitute a benefit that precludes application of the adverse interest exception” (Conway v Marcum & Kliegman LLP, 176 AD3d 477, 477-78 [l st Dept 2019]). The First Department elaborated: Moreover, reliance on speculation about the benefits to be derived from the continued existence of an entity is inconsistent with the analysis of the adverse interest exception in Kirschner. It may be possible in every case to construct a hypothetical scenario where the company teetering on the brink of insolvency because of its agent’s fraud meets with an opportune circumstance that allows it to resume legitimate business operations. Permitting such speculation would render the adverse interest exception meaningless. Further, an ongoing fraud and a continued corporate existence may harm a corporate entity: The agent may prolong the company’s legal existence so that he can continue to loot from it, as appears to have been the case here. (Id. at 478.) Giving Plaintiffs the benefit of all reasonable inferences, the Court cannot conclude that Defendants have conclusively established an in pari delicto defense based solely on the pleadings. Plaintiffs have pleaded sufficient allegations to support an inference that Lethem and Palleschi totally abandoned FTE’ s interests and kept the entity alive merely to pilfer it. The purposes for which the alleged funds were used included “deferred salaries to [Lethem and Palleschi],” “personal expenses, ranging from private jet trips and personal warehouse leases,” and “engaging in related party transactions that sent millions of FTE common stock shares … to entities Palleschi and Lethem controlled” (id ,i 440).”

“In short, Plaintiffs have adequately alleged that the fraud underlying this case was so pervasive and thorough that FTE may have merely been the vehicle for Lethem and Palleschi to carry out their fraud and not an entity which benefited from the fraud. Of course, this ruling does not preclude Defendants from seeking to establish an in pari delicto defense based on the evidence adduced at summary judgment or trial.”

Lateral Inv. Mgt., LLC v Marcum, LLP 2024 NY Slip Op 33865(U) October 29, 2024 Supreme Court, New York County Docket Number: Index No. 154273/2023 Judge: Joel M. Cohen has a wealth of issues and lessons. The first principle to take from this case is what is negligence, what is “basically” negligence and what is not.

“This is an accounting malpractice and fraud case. Defendant Marcum LLP (“Marcum”) was retained by plaintiffs FTE Networks, Inc. (“FTE”) and Benchmark Builders, Inc. (“Benchmark”) to perform audits of their respective businesses. Defendant Markowitz, a partner at Marcum, oversaw the audits. According to Plaintiffs, during the course of the audit work FTE’s then-Chief Executive Officer Michael Palleschi and then-Chief Financial Officer David Lethem were engaged in a wide array of fraudulent schemes that ultimately resulted in criminal guilty pleas and an investigation by the Securities and Exchange Commission (“SEC”). Plaintiffs contend in this action that Marcum not only negligently failed to uncover and disclose the misconduct during the course of its audit, but that Marcum was made aware of the misconduct and assisted Lethem and Palleschi in concealing it.”

“According to the Complaint, the factual allegations of which are assumed to be true for purposes of this motion, Marcum was FTE’s “long-standing auditor[]” (NYSCEF 47 iJiJ 5, 60). The relationship was far reaching, and “had impacts on their relationship with several other of [Marcum’s] significant institutional clients” due to their relationship with a former Board Member of FTE, Luisa Ingargiola (id ,i,i 64, 66). Plaintiffs allege that these relationships motivated Marcum and Markowitz to engage effectively in a cover-up of misconduct by FTE’s CEO and CFO (id ,i 67). The Complaint states that “Ingargiola was one of-if not the onlyBoard member who had any idea” about an improper scheme by Lethem and Palleschi to issue undisclosed convertible notes (id ,i,i 56, 70). Furthermore, Plaintiffs allege “Defendants directly participated in Palleschi and Lethem’s embezzlement and conversion of Company funds as Palleschi and Lethem would convey trips, gifts and other perks to Markowitz in exchange for his willingness to participate in the fraud against FTE” (id ,i 145).”

“Under CPLR 214(6), a three-year statute of limitations applies to “an action to recover damages for malpractice, other than medical, dental or podiatric malpractice, regardless of whether the underlying theory is based in contract or tort” (see Maya NY, LLC v Hagler, I 06 AD3d 583, 586 [1st Dept 2013] [applying 3-year statute of limitations to claim for accountant malpractice]). By contrast, claims alleging fraud and breach of fiduciary duty based on fraud – if not deemed to be malpractice claims governed by CPLR 214(6)- are generally subject to a six-year statute of limitations, and potentially longer (two years after the plaintiffs actual or constructive discovery of the misconduct) in the case of fraud (CPLR 213(8); Kaufman v Cohen, 307 AD2d 113, 119 [I st Dept 2003] [ noting the statute of limitations for breach of fiduciary duty claims “based on allegations of actual fraud” is six years]; see also Monteleone v Monteleone, 162 AD3d 761, 763 [2d Dept 2018]). The same statute of limitations applies to claims for aiding and abetting breach of fiduciary duty and fraud (see Kaufman, 307 AD2d at 126-27; see also Wimbledon Financing Master Fund, Ltd v Hallac, 192 AD3d 617, 618 [I st Dept 2021]; Belair Care Ctr., Inc. v Cool Insuring Agency, Inc., 168 AD3d 1162, 1166 [3d Dept 2019])], again assuming they are not deemed to be malpractice claims subject to CPLR 214(6). a. Negligence and Gross Negligence Plaintiffs’ negligence and gross negligence claims are indisputably malpractice claims. Such claims accrue when the malpractice is committed, not when it is discovered (Williamson ex rel. Lipper Convertibles, L.P. v PricewaterhouseCoopers LLP, 9 NY3d 1, 7-8 [2007]). In the accounting context, the claim “accrues upon the client’s receipt of the accountant’s work product since this is the point that a client reasonably relies on the accountant’s skill and advice” (Ackerman v Price Waterhouse, 84 NY2d 535, 541 [1994]). Here, the negligence and gross negligence claims accrued when Marcum issued its audit reports, namely on May 11, 2017, and April 17, 2018 (NYSCEF 59, 62). Thus, even after considering the effect of COVID tolling covering a portion of 2020, this May 2023-initiated action is prima facie untimely. Thus, those claims are presumptively time-barred, subject to estoppel principles discussed infra.”

“Plaintiffs’ breach of contract claims are also presumptively untimely under CPLR 214(6) because they are malpractice claims “based in contract” (see also Pannone v Silberstein, 118 AD3d 413, 415 [l st Dept 2014]). Contrary to Plaintiffs assertions, the language of the FTE agreement, which provides that Marcum was “responsible to inform [the Client] … of all matters of fraud, material errors, and all illegal acts that may come to our attention” does not create an independent contractual duty removing the claim from the confines of CPLR 214( 6) (NYSCEF 47, ,i 40; NYSCEF 66-67).1 Rather, this language merely incorporates a professional accounting standard that would have been applicable in any event (see Auditing Standards 2401. 79 [“Whenever the auditor has determined that there is evidence that fraud may exist, that matter should be brought to the attention of an appropriate level of management.”]). c. The Remaining Claims As to Plaintiffs’ remaining claims for (1) fraud; (2) civil conspiracy and conspiracy to commit fraud; (3) breach of fiduciary duty; (4) aiding and abetting (a) fraud, (b) breach of fiduciary duty, (c) embezzlement, (d) breach of trust, and (e) conversion; and (4) commercial bad faith, Defendants do not in the present motion argue that these claims are untimely under their own respective statutes of limitations, but rather are-like the negligence and breach of contract claims discussed above-essentially malpractice claims that are subject to a three-year statute of limitations. In assessing whether a claim is subject to the three-year statute of limitations contained in CPLR 214(6), “the pertinent inquiry is … whether the claim is essentially a malpractice claim” (In re R.M Kliment & Frances Halsband, Architects, 3 NY3d 538, 541-42 [2004]). Plaintiffs’ allegations in connection with these claims, accepted as true and broadly construed, permit a reasonable inference that Defendants not only breached their professional obligations as auditors (that is, that they committed professional malpractice), but also that they knew of and participated in the fraudulent schemes and affirmatively concealed them. If true, that goes beyond the confines of professional malpractice. Accordingly, Plaintiffs remaining claims (if proven) are not subject to the three-year statute of limitations governing malpractice claims. “

Being too poor to arbitrate is a unique way out of arbitration and in Villaver v Paglinawan 2024 NY Slip Op 04159 [230 AD3d 533] August 7, 2024
Appellate Division, Second Department allows plaintiff to bring the case back to Supreme Court.

“In an action for declaratory relief and to recover damages for legal malpractice, breach of fiduciary duty, and intentional infliction of emotional distress, the plaintiff appeals from an order of the Supreme Court, Queens County (Frederick D.R. Sampson, J.), entered May 12, 2021. The order granted that branch of the defendants’ motion which was pursuant to CPLR 3211 (a) (5) to dismiss the complaint on the ground of collateral estoppel.

Ordered that the order is reversed, on the law, with costs, that branch of the defendants’ motion which was pursuant to CPLR 3211 (a) (5) to dismiss the complaint on the ground of collateral estoppel is denied, and the matter is remitted to the Supreme Court, Queens County, for a determination of the remaining branches of the defendants’ motion.

In December 2018, the plaintiff commenced an action (hereinafter the prior action) against the defendants to recover damages for legal malpractice, breach of fiduciary duty, and intentional infliction of emotional distress. In an order dated May 7, 2019, the Supreme Court, Queens County (Robert I. Caloras, J.), inter alia, directed dismissal of the complaint pursuant to CPLR 3211 (a) (1) and (5) based on the arbitration clause contained in the parties’ retainer agreement and directed the parties to proceed to arbitration.

In July 2019, the plaintiff filed an arbitration claim against the defendants. The arbitrator subsequently closed the parties’ case on the grounds that the plaintiff purportedly could not afford the required fees and the defendants had not responded to the arbitrator.”

“Pursuant to CPLR 3211 (a) (5), a party may move to dismiss a cause of action based on the doctrine of collateral estoppel (see 23 E. 39th St. Dev., LLC v 23 E. 39th St. Mgt. Corp., 172 AD3d 964, 967 [2019]). Under the doctrine of collateral estoppel, or issue preclusion, a party is precluded “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]; see Cullen v Moschetta, 207 AD3d 699, 700 [2022]). “This doctrine applies only ‘if the issue in the second action is identical to an issue which was raised, necessarily decided and material in the first action, and the plaintiff had a full and fair opportunity to litigate the issue in the earlier action’ ” (City of New York v Welsbach Elec. Corp., 9 NY3d 124, 128 [2007], quoting Parker v Blauvelt Volunteer Fire Co., 93 NY2d 343, 349 [1999]; see Jaber v Elayyan, 191 AD3d 964, 966 [2021]). “The party seeking to invoke collateral estoppel has the burden to show the identity of the issues, while the party trying to avoid application of the doctrine must establish the lack of a full and fair opportunity to litigate” (Matter of Dunn, 24 NY3d 699, 704 [2015]; see HSBC Bank USA, N.A. v Pantel, 179 AD3d 650, 651 [2020]).

Here, the defendants failed to establish that the issue decided in the prior action was identical to the issues raised in the present action (see Simmons v Jones Law Group, LLC, 214 AD3d 835, 837 [2023]). The only issue decided in the prior action was whether the retainer agreement signed by the parties contained a valid agreement to arbitrate. Although the plaintiff raised the issues of legal malpractice, breach of fiduciary duty, and intentional infliction of emotional distress in both the prior and present actions, the defendants failed to establish that these issues were “actually litigated, squarely addressed, and specifically decided” in the prior action (M. Kaminsky & M. Friedberger v Wilson, 150 AD3d 1094, 1095 [2017]). Furthermore, the determination in the prior action does not preclude the plaintiff from raising in the present action whether the defendants waived their right to arbitrate and whether the cost of arbitration was prohibitively expensive, since these issues stem from events that occurred after the prior action had been dismissed. Thus, the Supreme Court should not have granted that branch of the defendants’ motion which was pursuant to CPLR 3211 (a) (5) to dismiss the complaint on the ground of collateral estoppel.”

In a short but sweet explanation, the First Department explains why a client can blame the attorney after following the attorney’s advice and taking a particular position in Ingram Yuzek Gainen Carroll & Bertolotti, LLP v McCullar 2024 NY Slip Op 05406
Decided on October 31, 2024 Appellate Division, First Department.

“Defendant alleges that plaintiff law firm negligently caused the commencement of guardianship proceedings over his longtime partner whom he hoped to marry, resulting in an onerous guardianship arrangement.

The court correctly denied plaintiff’s motion to dismiss the counterclaim pursuant to CPLR 3211(a)(7). Defendant pleaded with sufficient detail his counterclaim that plaintiff committed legal malpractice by, among other things, failing to respond to a cease-and-desist letter, failing to move to dismiss the guardianship petition, and failing to negotiate a more favorable settlement (see IMO Indus. v Anderson Kill & Olick, 267 AD2d 10, 11 [1st Dept 1999]). Moreover, it can be reasonably inferred from the allegations that plaintiff’s negligence caused defendant’s loss (see Garnett v Fox, Horan & Camerini, LLP, 82 AD3d 435, 436 [1st Dept 2011]).

In addition, plaintiff’s submission of documents from the underlying action do not conclusively establish a defense to the malpractice claim as a matter of law (see IMO Indus., 267 AD2d at 11). The documents showing that defendant consented to the guardianship and accepted the terms of the settlement do not preclude him from taking contrary positions in this action under the doctrine of judicial estoppel, as the premise of his counterclaim is that he made those statements based on plaintiff’s negligent advice.”