New York Attorney Malpractice Blog

New York Attorney Malpractice Blog

The Rare Legal Malpractice Verdict

Posted in Legal Malpractice Cases

While many legal malpractice cases are brought, few, very few proceed to trial and fewer reach verdict.  Our research shows only one jury verdict in 2017 and only this bench trial verdict in 2016.

Abramowitz v Lefkowicz & Gottfried, LLP  2018 NY Slip Op 02589  Decided on April 18, 2018  Appellate Division, Second Department is the story of the Daily News and a coin seller fallng out.  The legal malpractice arises from a series of unfortunate mistakes.

“23KT Gold Collectibles, Ltd. (hereinafter 23KT), and Merrick Mint, Ltd. (hereinafter Merrick), are affiliated designers and manufacturers of memorabilia and collectible coins. In 2008, 23KT entered into an agreement with Daily News, L.P. (hereinafter Daily News), in which the parties to the agreement agreed to develop and promote a coin club through which they would sell collectible coins and share profits. 23KT agreed to design and manufacture coins and coin sets, and Daily News agreed to provide 204 pages of advertising space to advertise the coins. The coins sold through the coin club would also be offered for sale on a website called “ecoins,” which would be operated by 23KT. The agreement included an exclusivity clause providing that coin club products could not be advertised, marketed, sold, or offered for sale by 23KT or its affiliates, including Merrick, in any forum or media other than Daily News advertisements or ecoins. Products which were substantially similar, but not identical, to a coin club product could not be sold by 23KT, but were permitted to be sold by its affiliates, such as Merrick. The agreement permitted either party to terminate the agreement via written notice if the other party materially breached the agreement “and the breach is not remedied within thirty (30) days of the breaching party’s receipt of written notice of the breach.” The agreement specified that it was the entire agreement, that it could not be [*2]modified except in writing, and that a failure to exercise any right under the agreement did not operate as a waiver of that right.

By letter dated January 29, 2009, Daily News notified 23KT that it had materially breached the exclusivity provision of the agreement by marketing coin club products and similar products in the New York Post and on certain websites. The notice stated that the breaches were not capable of being remedied, and that the agreement would terminate on March 1, 2009. 23KT responded with a letter in which it disputed that a breach had occurred, and asserted that, in any event, Daily News was required to permit it to cure the alleged breaches. No agreement was reached on the issue of a cure, and 23KT retained the defendant Lefkowicz & Gottfried, LLP (hereinafter the defendant law firm), to commence an action, inter alia, to recover damages for breach of contract against Daily News. Daily News obtained summary judgment dismissing the first complaint filed on behalf of 23KT, a finding in its favor on liability on its counterclaims against 23KT due to discovery failures, and dismissal of the second complaint filed on behalf of 23KT based on the doctrine of res judicata. 23KT then retained another attorney, who negotiated a settlement in which the parties discontinued their claims and 23KT paid Daily News the sum of $20,000.

23KT and others then commenced this legal malpractice action against the defendant law firm and its principals. In an order dated August 4, 2014, the Supreme Court granted the defendants’ motion for summary judgment dismissing the complaint. However, in an order dated April 1, 2015, the court granted the plaintiffs’ motion for leave to reargue the defendants’ motion and, upon reargument, denied the defendants’ motion. The matter proceeded to trial, after which the court determined that 23KT established its legal malpractice cause of action against the defendant law firm. Judgment was entered in favor of 23KT and against the defendant law firm in the principal sum of $1,675,000, representing the sum 23KT would have recovered from Daily News in the absence of the law firm’s negligence, the sum spent to settle the matter with Daily News, and a return of the retainer paid to the defendant law firm. The defendant law firm appeals.”

“Here, the Supreme Court determined that the defendant law firm was negligent in the underlying representation and that, but for such negligence, 23KT would have prevailed in the underlying litigation. On appeal, the defendant law firm challenges only the finding of but-for causation, arguing that 23KT was in breach of the exclusivity clause of the underlying agreement and therefore would not have prevailed in the underlying litigation, regardless of its alleged malpractice. The contention is without merit. The evidence at trial established that most of the alleged breaches listed in Daily News’ January 29, 2009, breach notice were actually sales by Merrick of similar, but not identical, coins, which did not violate the exclusivity clause of the agreement. “

No Continuous Representation in a $ 80 Million Legal Malpractice Case

Posted in Legal Malpractice Cases

The statute of limitations is a very high barrier to litigation, and to legal malpractice in particular, as there is often a long delay between the malpractice and the result.  The statue starts to run with the negligent act, and only continuous representation tolling can save the day for plaintiff.  Here, in Davis v Cohen & Gresser, LLP  2018 NY Slip Op 02542  Decided on April 12, 2018
Appellate Division, First Department the statute of limitations and the successor counsel doctrine join to defeat the claim.

“In opposing defendant’s prima facie showing that the claim is untimely, Davis had the burden of demonstrating the statute of limitations has been tolled or does not apply (see CLP Leasing Co., LP v Nessen, 12 AD3d 226, 227 [1st Dept 2004]). Davis cannot rely on the continuous representation doctrine to toll the statute of limitations as the doctrine “tolls the Statute of Limitations only where the continuing representation pertains specifically to the matter in which the attorney committed the alleged malpractice” (see Shumsky v Eisenstein, 96 NY2d 164, 168 [2001]).

The documentary evidence establishes that following decedent’s death, defendant did not represent the estate in the Devine action. The retainer agreements executed with defendant after [*2]the decedent’s death were explicitly limited to representing the estate in other litigation and not the Devine litigation. In addition, the evidence demonstrated that following decedent’s passing defendant never entered an appearance on the estate’s behalf while other law firms were substituted as counsel in the Devine action, made a motion to substitute the estate as plaintiff, and appeared on behalf of the estate, and ultimately settled with the Devine parties in May 2014 (see Matter of Merker, 18 AD3d 332, 332-333 [1st Dept 2005] [no continuous representation where plaintiff had “retained new counsel”]).

Further, the continuous representation doctrine does not apply where there is only a vague “ongoing representation” (Johnson v Proskauer Rose LLP, 129 AD3d 59, 68 [1st Dept 2015]). For the doctrine to apply, the representation must be specifically related to the subject matter underlying the malpractice claim, and there must be a mutual understanding of need for further services in connection with that same subject matter (see Shumsky, 96 NY2d at 168; see also CLP Leasing, 12 AD3d at 227).

Contrary to purported ongoing representation by decedent’s family and advisors, the record evidence demonstrates the lack of a mutual understanding that defendant would continue to represent the estate in the Devine action, even if there was a continuation of a general professional relationship (see Pellegrino v Oppenheimer & Co., Inc., 49 AD3d 94, 99 [1st Dept 2008] [“a party cannot create the relationship based on his or her own beliefs or actions”]; Jane St. Co. v Rosenberg & Estis, 192 AD2d 451, 451 [1st Dept 1993], lv denied 82 NY2d 654 [1993] [“plaintiff’s unilateral beliefs and actions do not confer upon it the status of client”]).”

“Even were it not untimely, the malpractice claim should also be dismissed because “the proximate cause of any damages sustained by plaintiff was not the alleged malpractice of defendant[], but rather the intervening and superseding failure of plaintiff’s successor attorney” (Boye v Rubin & Bailin, LLP, 152 AD3d 1, 10 [1st Dept 2017]). This is the case where successor counsel had “sufficient time and opportunity to adequately protect plaintiff’s rights,” but failed to do so (Maksimiak v Schwartzapfel Novick Truhowsky Marcus, P.C., 82 AD3d 652, 652 [1st Dept 2011]; Somma v Dansker & Aspromonte Assoc., 44 AD3d 376, 377 [1st Dept 2007]).”

An Error, Yes. “But For” Causation? Nope

Posted in Legal Malpractice Cases

Here is the difference between legal malpractice and all other forms of litigation, distilled to a single sentence by Justice Kornreich in NextEra Energy, Inc. v Greenberg Traurig, LLP  2018 NY Slip Op 30638(U) April 11, 2018  Supreme Court, New York County  Docket Number: 652484/2017

“Between August 2002 and December 2010, NextEra was represented in the Bankruptcy
Action by Greenberg Traurig. From December 2010 through the remainder of the proceedings,
NextEra was represented by Skadden, Al-ps, Slate, Meagher & Flom LLP (Skadden). NextEra
changed counsel due to Greenberg Traurig’s failure to assert an affirmative defense at the outset
of the Bankruptcy Action. As discussed herein, such delay resulted in the bankruptcy court
(Gerber, J.), upon Skadden’s motion, denying NextEra’s motion for leave to amend. That said,
Judge Gerber made it clear at oral argument that even if the defense had been timely pleaded by NextEra, it would have failed on the merits. “

The facts and analysis of why the defense would have failed on the merits takes up many pages, but the message is that a mistake has been pointed out, and the mistake is clear.  However, in this “case-within-a-case” analysis, it would not have made a whit of difference.

Put in more elegant language by the Judge: “This fact is dispositive. It is well settled that “in order to prevail in an action for legal malpractice, the plaintiff must plead factual allegations which, if proven at trial, would demonstrate that counsel had breached a duty owed to the client, that the breach,was the proximate cause of the injuries, and that actual damages were sustained.” Dweck Law Firm, LLP v Mann, 283 AD2d 292, 293 (1st Dept 2001) (emphasis added); see Heritage Partners, LLC v Stroock & Stroock & Lavan LLP, 133 AD3d 428, 428-29 (1st Dept 2015). On a malpractice claim, proximate causation is “but for” causation. Nomura Asset Capital Corp. v Cadwalader, Wickersham & Taft LLP, 26 NY3d 40, 50 (2015), citing AmBase, 8 NY3d at 434. Here, there is nothing that Greenberg Traurig could have done to avoid a trial and, therefore, its alleged
malpractice was not the “but for” cause of NextEra’s trial and appellate expenses. While it surely would have been better practice for Greenberg Traurig to plead a section 546( e) defense at the outset if that was a defense it intended to assert, the failure to do so in this instance did not end up harming NextEra. FPLG ultimately won at trial because Adelphia failed to prove insolvency. 16 The only marginally better outcome would have been a win on summary judgment. Given the timeline of the Bankruptcy Action, an earlier assertion of a section 546( e) defense could not have plausibly resulted in summary dismissal. See Heritage Partners LLC v Stroock & Stroock & Lavan LLP, 155 AD3d 561 (1st Dept 2017) (causation cannot be based on “speculative nature of plaintiffs’ claim.”). NextEra’s section 546(e) defense had two possible fates: (1) early pleading, which would have resulted in dismissal based on Judge Gerber’s clear pre-Enron view of the law; or (2) late pleading, which, as we know, resulted in dismissal for inexcusable delay. Greenberg Traurig could not have avoided these outcomes. Ergo, it cannot be held liable for malpractice.”

Extra Obligations in a Legal Malpractice Case

Posted in Legal Malpractice Cases

There are additional hurdles for legal malpractice cases not found in other spheres of the law.  Rodriguez v Dean    2018 NY Slip Op 30642(U)  April 10, 2018  Supreme Court, New York County Docket Number: 805280/16  Judge: Sherry Klein Heitler presents a new wrinkle we have not seen before.  There are more than a few legal malpractice cases arising from negligently handled medical malpractice cases.  There is a requirement in medical malpractice complaints that Plaintiff file a Certificate of Merit pursuant to CPLR 3012-a(1).  There is an extensive body of law concerning what happens if the Certificate is not timely filed.  It can (generally) be filed nunc-pro-tunc.  Here, Supreme Court required the legal malpractice attorney to file a Certificate, and then dismissed for failure to file it.

“This is a legal malpractice action alleging that defendants failed to timely commence a medical malpractice action on plaintiffs’ behalf. The facts of this case are set forth in detail in the court’s November 27, 2017order. 1 Briefly, plaintiff Rosalia Rodriguez allegedly underwent corrective surgery at NYU Hospital in New York on February 12, 2012 which allegedly resulted in injuries to her leg. Ms. Rodriguez alleges that she then signed a retainer agreement with the law firm of Dell & Dean, PLLC to prosecute a medical malpractice action on her behalf. This alleged retainer has not been produced to the court. ”

“Moreover, plaintiffs do not submit any evidence to counter defendants’ assertion that there
is no medical basis for Ms. Rodriguez’ underlying medical malpractice claim. To be sure,.the
certificate of merit provided on the prior motion indicates that plaintiffs’ counsel consulted with a
physician who was not identified. For this reason it was the court’s belief that plaintiffs were in
possession of at least some medical information to support a cognizable medical malpractice claim.”

“CPLR 3012-a was “designed to warn lawyers away from bringing [medical malpractice]
actions at all unless they have consulted appropriate experts in the field to ascertain that the claim
has at least arguable merit.” Connors, Practice Commentaries, McKinneys Cons Laws of NY, Book
7B, C3012-a:l, at 141. Given the facts and circumstances of this case, and despite affording
plaintiffs several opportunities to do so over the course of several years, there is no evidence to
justify the continuation of this action. At this point, defendants are being prejudiced, and it would
be unjust to allow this case to proceed any further. See Horn v Boyle, 260 AD2d 76 (3d Dept
1999); see also Grad v Hajliger, 68 AD3d 543, 544 (1st Dept 2009); Deleon v Sonin & Genis, 303
AD2d 291, 292 (1st Dept 2003); George v St. John’s Riverside Hosp., 162 AD2d 140, 140 (1st Dept
1990); Kolb v Strogh, 15 8 AD2d 15, 22 (2d Dept 1990). “

An Unusual Use of the Grace v. Law Rule

Posted in Legal Malpractice Cases

There have been only a few uses of the Grace v. Law rule that if a plaintiff has a viable (“likely to succeed”) appeal, it must be taken prior to commencing a legal malpractice case. Florists’ Mut. Ins. Co., Inc. v Behman Hambelton, LLP  2018 NY Slip Op 02556  Decided on April 12, 2018  Appellate Division, First Department is the most unusual of them. Typically it is the attorney who attempts to invoke the rule against plaintiff; here, the opposite.

The First Department decided the case with the fewest words it could manage:

“Plaintiff’s contention that it was obligated to pursue an appeal of the underlying action prior to filing a legal malpractice claim is unavailing, as the appeal to the Workers’ Compensation Board was not likely to succeed (Grace v Law, 24 NY3d 203, 209-210 [2014]). Furthermore, the Workers’ Compensation Board’s appellate decision was issued on October 29, 2013, leaving plaintiff almost two years to bring an action on the alleged malpractice, which accrued in September 2012.”

Two Bombshells From the Second Department

Posted in Legal Malpractice Cases

Betz v Blatt  2018 NY Slip Op 02445 and 2444  Decided on April 11, 2018  Appellate Division, Second Department and   are two extensively explained and well-reasoned decisions in the otherwise barren trust and estates legal malpractice world, in which a Judiciary Law § 487 claim is upheld.  One reason for the relative lack of cases is the requirement that only the executor has standing to raise losses to the estate.  This precludes beneficiaries from successful litigation against an attorney.

Read the case for its discussion of JL § 487, aiding and abetting fraud and the obligations of the estate’s attorneys in reviewing accountings.

“Judiciary Law § 487 imposes civil and criminal liability on any attorney who “(1) [i]s guilty of any deceit or collusion, or consents to any deceit or collusion, with intent to deceive the court or any party; or, (2) [w]ilfully delays his client’s suit with a view to his own gain” (Judiciary Law § 487; see Gumarova v Law Offs. of Paul A. Boronow, P.C., 129 AD3d 911). A cause of action alleging a violation of Judiciary Law § 487 must be pleaded with specificity (see Betz v Blatt, 116 AD3d at 817; Putnam County Temple & Jewish Ctr., Inc. v Rhinebeck Sav. Bank, 87 AD3d 1118, 1120).

Judiciary Law § 487 “focuses on the attorney’s intent to deceive, not the deceit’s success” (Amalfitano v Rosenberg, 12 NY3d 8, 14). Accordingly, although injury to the plaintiff is an essential element of a Judiciary Law § 487 cause of action seeking civil damages (see Klein v Rieff, 135 AD3d 910, 913; Gumarova v Law Offs. of Paul A. Boronow, P.C., 129 AD3d at 911), “recovery of treble damages under Judiciary Law § 487 does not depend upon the court’s belief in a material misrepresentation of fact in a complaint” (Amalfitano v Rosenberg, 12 NY3d at 15). A party’s legal expenses in defending the lawsuit may be treated as the proximate result of the misrepresentation (see id.).

The Supreme Court properly denied that branch of Pieragostini’s motion which was for summary judgment dismissing the cause of action alleging a violation of Judiciary Law § 487 [*3]insofar as asserted against him because he failed to establish his prima facie entitlement to judgment as a matter of law (see Mazel 315 W. 35th LLC v 315 W. 35th Assoc. LLC, 120 AD3d 1106, 1107). In his deposition testimony submitted in support of his motion for summary judgment, Pieragostini admitted that, in the underlying proceeding, he sought approval from the Surrogate’s Court of an accounting and an addendum based on information provided by the former executor, as well as his accountant and former attorney, which he did not independently verify. Accordingly, Pieragostini did not eliminate triable issues of fact as to whether he acted with an intent to deceive the court or the plaintiff (see Judiciary Law § 487[1]; Mazel 315 W. 35 LLC v 315 W. 35th Assoc. LLC, 120 AD3d at 1107). Moreover, the plaintiff raised triable issues of fact by alleging that Pieragostini filed a blatantly deficient accounting which was inaccurate and incomplete, and that the addendum further delayed the administration of the estate, causing additional legal fees from the estate to Pieragostini, along with other financial injury to the plaintiff. Accordingly, the Supreme Court properly denied that branch of Pieragostini’s motion which was for summary judgment dismissing the cause of action alleging a violation of Judiciary Law § 487 insofar as asserted against him.”

“However, the Supreme Court erred in denying that branch of the Sirignano defendants’ motion which was for summary judgment dismissing the cause of action alleging that they aided and abetted fraud. The elements of a cause of action to recover damages for aiding and abetting fraud are (1) the existence of an underlying fraud, (2) knowledge of the fraud by the aider and abettor, and (3) substantial assistance by the aider and abettor in the achievement of the fraud (see Fox Paine & Co., LLC v Houston Cas. Co., 153 AD3d 678, 679; Swartz v Swartz, 145 AD3d 818, 824). “Substantial assistance requires an affirmative act on the defendant’s part” (Fox Paine & Co., LLC v Houston Cas. Co., 153 AD3d at 679 [internal quotation marks omitted]; see Smallberg v Raich Ende Malter & Co., LLP, 140 AD3d 942, 944). Mere inaction by an alleged aider or abettor constitutes substantial assistance only if the defendant owes a fiduciary duty directly to the plaintiff (see Smallberg v Raich Ende Malter & Co., LLP, 140 AD3d at 944).

The elements of an underlying fraud are (1) material representations that were false, (2) the actor knew the representations were false and made them with the intent to induce reliance by the plaintiff, (3) the plaintiff justifiably relied on the actor’s misrepresentations, and (4) the plaintiff was injured as a result of the misrepresentations (see Lee Dodge, Inc. v Sovereign Bank, N.A., 148 AD3d 1007, 1008; Cash v Titan Fin. Servs., Inc., 58 AD3d 785, 788).”

We Don’t Know Why, But Case Reversed and Dismissed

Posted in Legal Malpractice Cases

Bench and Bar read appellate decisions in order to understand how courts think, how they decide and for guidance in how to present cases.  Panos v Eisen  2018 NY Slip Op 02480  Decided on April 11, 2018  Appellate Division, Second Department could have been instructive, could have explained why Plaintiff”s proofs were lacking, could have illustrated the black-letter law.  The decision gives no explanation at all.

“To meet their initial burden on that branch of their motion which was for summary judgment dismissing the complaint, the defendants were required to “demonstrate, prima facie, either that they did not breach their duty to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession or that any breach of that duty did not proximately cause the plaintiff to suffer actual and ascertainable damages” (Montero v Cohen, 104 AD3d 654, 655; see Ferrigno v Jaghab, Jaghab & Jaghab, P.C., 152 AD3d 650, 652; Ragunandan v Donado, 150 AD3d 1289, 1290). The defendants established, prima facie, both the lack of a breach of duty and the lack of proximate cause. Therefore, in order to defeat the defendants’ motion, the plaintiff had “to demonstrate the existence of a triable issue of fact in connection with both matters” (Montero v Cohen, 104 AD3d at 655; see Stukas v Streiter, 83 AD3d 18, 25). Since the plaintiff failed to raise [*2]a triable issue of fact as to whether the defendants’ alleged breach of the duty of care proximately caused him to suffer actual and ascertainable damages, the Supreme Court should have granted that branch of the defendants’ motion which was for summary judgment dismissing the complaint.”

The Recurring Personal Injury – Workmans’ Compensation Problem

Posted in Legal Malpractice Cases

All too frequently a person is injured at work, retains an attorney, and a problem arises several years later.  Either there is a “consent” problem with the WC carrier, or there is a total failure to file a WC claim.  Sometimes, as in Encalada v McCarthy, Chachanover & Rosado, LLP  2018 NY Slip Op 02434  Decided on April 10, 2018  Appellate Division, First Department it is the opposite.  Here, the WC claim was brought, but the PI case was not.  How does it resolve?

“Plaintiff was injured in an accident while working as an asbestos remover on March 31, 2001. Within a few days thereof, he reached out to defendant law firm for legal assistance. The parties dispute whether defendant law firm told plaintiff that it would represent him in all claims related to the accident. Defendant served as legal counsel for plaintiff in the related workers’ compensation action until December 2004, when it withdrew as counsel. On November 27, 2007, plaintiff brought a legal malpractice action against defendant for failing to file a notice of claim within 30 days of the accident and failing to bring a personal injury lawsuit against municipal entities within 1 year and 90 days of the accident.

Defendant as movant met its prima facie burden on summary judgment by showing that plaintiff’s legal malpractice case was untimely as it was not commenced within three years of the date of accrual of each legal malpractice claim (see CPLR 214[6]).

However, plaintiff raised a triable issue of fact with respect to whether the three-year statute of limitations was tolled under the continuous representation doctrine. Under the continuous representation doctrine, a person seeking professional assistance is placed in a difficult position if required to sue his or her attorney while the attorney continues to represent them on a particular legal matter (Shumsky v Eisenstein, 96 NY2d 164, 167-168 [2001]). Accordingly, the doctrine tolls the running of the statute of limitations on malpractice claims until the ongoing representation is completed (id.). However, the application of this doctrine is limited “to the course of representation concerning a specific legal matter,” and is not applicable to the client’s “continuing general relationship with a lawyer … involving only routine contact for miscellaneous legal representation … unrelated to the matter upon which the allegations of malpractice are predicated” (id. at 168). The record presents an issue of fact as to whether defendant continuously represented plaintiff in connection with a personal injury claim based on the accident, such as to toll the statute of limitations during that time (see Glamm v Allen, 57 NY2d 87, 94 [1982]; Waggoner v Caruso, 68 AD3d 1, 6-7 [1st Dept 2009]).

Finally, defendant’s argument regarding the alleged contradiction in plaintiff’s deposition testimony and affidavit is unavailing. Whether plaintiff’s testimony about the initial conversation can support his malpractice claim is ultimately a credibility issue for the fact finder and not appropriate for resolution on summary judgment (see Ferrante v American Lung Assn., 90 NY2d 623, 631 [1997]; Glick & Dolleck v Tri-Pac Export Corp., 22 NY2d 439, 441 [1968]).”

The Second Department Continues to Apply The First Department’s Settlement Rule

Posted in Legal Malpractice Cases

In Gad v Sherman  2018 NY Slip Op 02316  Decided on April 4, 2018 Appellate Division, Second Department we see the Second Department pass up an invitation to endorse a First Department concept that expressing “satisfaction” with the attorney’s work at an allocution settling a matrimonial action precludes a later legal malpractice case against the attorney.  This concept was first enunciated in the First Department in Katebi v. Fink, 51 AD3d 424.  (“Moreover, as to all defendants, the evidence establishes that when entering into the settlement of the divorce action, plaintiff acknowledged in open court that she was satisfied with counsels’ representation….”).

Here, differently, “In an order dated June 18, 2013, the Supreme Court, Westchester County, assigned the defendant to represent the plaintiff in an underlying matrimonial action commenced against the plaintiff by his now former wife (hereinafter the wife). On April 11, 2014, the parties to the matrimonial action appeared with their attorneys before the court and agreed to resolve all issues pending in the action. As a result, the wife’s counsel read an outline of the parties’ agreement into the record, which included the understanding that a formal written stipulation would follow. In addition, both the plaintiff and the wife, in response to questions from the court, indicated that they understood the terms and conditions as placed on the record and that they were satisfied with their legal representation. Thereafter, in May 2014, the plaintiff and the wife signed the written stipulation of settlement (hereinafter the stipulation).”

“” A claim for legal malpractice is viable, despite settlement of the underlying action, if it is alleged that settlement of the action was effectively compelled by the mistakes of counsel'” (Schiff v Sallah Law Firm, P.C., 128 AD3d 668, 669, quoting Tortura v Sullivan Papain Block McGrath & Cannavo, P.C., 21 AD3d 1082, 1083; see Katz v Herzfeld & Rubin, P.C., 48 AD3d 640, 641).”

“Here, the documentary evidence submitted by the defendant, consisting of the transcript from the April 2014 court appearance, failed to utterly refute the plaintiff’s allegations of malpractice, thereby failing to conclusively establish a defense as a matter of law in this legal malpractice action (see Prott v Lewin & Baglio, LLP, 150 AD3d 908, 910; Palmieri v Biggiani, 108 AD3d 604, 607-6″

 

A Host of Secondary Reasons Why This Legal Malpractice Case Failed

Posted in Legal Malpractice Cases

Moran Enters., Inc. v Hurst  2018 NY Slip Op 02321  Decided on April 4, 2018  Appellate Division, Second Department illustrates why secondary issues may lead to dismissal.  Here, the failure to list a claim on a bankruptcy schedule along with the failure to pay franchise taxes doomed a variety of legal malpractice claims.

“The plaintiff retained attorney Margaret Hurst to represent it in certain matters, including filing a second Chapter 11 petition for bankruptcy on its behalf. A few months later, Hurst left active practice and transferred her clients to another attorney. The bankruptcy proceeding was subsequently dismissed. The plaintiff thereafter retained new attorneys, who filed a third Chapter 11 bankruptcy petition on its behalf. The asset schedules filed with the plaintiff’s third bankruptcy petition stated that the plaintiff’s only asset was certain real property, and failed to list any causes of action against Hurst. After the mortgagee of the real property sought to vacate the bankruptcy stay, the bankruptcy court dismissed the plaintiff’s third bankruptcy petition based upon the lack of equity in the property or other assets with which to pay the creditors.”

“The doctrine of judicial estoppel precludes a party from taking a position in one legal proceeding which is contrary to that which it took in a prior proceeding, simply because its interests have changed (see Davis v Citibank, N.A., 116 AD3d 819, 820; Festinger v Edrich, 32 AD3d 412, 413). “The twin purposes of the doctrine are to protect the integrity of the judicial process and to protect judicial integrity by avoiding the risk of inconsistent results in two proceedings'” (Davis v Citibank, N.A., 116 AD3d at 821, quoting Bates v Long Is. R.R. Co., 997 F2d 1028, 1038 [2d Cir] [citation omitted]). “[T]he integrity of the bankruptcy system depends on full and honest disclosure by debtors of all of their assets” (Rosenshein v Kleban, 918 F Supp 98, 104 [SD NY]). By failing to list causes of action on bankruptcy schedules of assets, the debtor represents that it has no such claims (see Crawford v Franklin Credit Mgt. Corp., 758 F3d 473, 486 [2d Cir]). Thus, the doctrine of judicial estoppel may bar a party from pursuing claims which were not listed in a previous bankruptcy proceeding (see B.N. Realty Assoc. v Lichtenstein, 21 AD3d 793, 798; McIntosh Bldrs. v Ball, 264 AD2d 869, 870; Cafferty v Thompson, 223 AD2d 99, 102).

For the doctrine to apply, there must be “a final determination in the bankruptcy proceeding endorsing the party’s inconsistent position concerning his or her assets” (Koch v National Basketball Assn., 245 AD2d 230, 231). However, a discharge from bankruptcy is not required for the application of the doctrine. “The bankruptcy court may accept’ the debtor’s assertions by relying on the debtor’s nondisclosure of potential claims in many other ways” (Hamilton v State Farm Fire & Cas. Co., 270 F3d 778, 784 [9th Cir]; see In re Coastal Plains, Inc., 179 F3d 197, 210 [5th Cir]).”

“The plaintiff further contends that leave to amend the answer should have been denied because Hurst’s delay in asserting the defense would prejudice it due to the expiration of the statute of limitations for a legal malpractice cause of action against its subsequent bankruptcy attorneys who failed to list the claims against Hurst in the bankruptcy schedules. However, the plaintiff asserted a timely legal malpractice cause of action against the subsequent bankruptcy attorneys, which was dismissed because the plaintiff was dissolved by the Secretary of State for failure to pay franchise taxes, and the plaintiff lacked the capacity to enforce obligations arising out of the representation until it secured retroactive de jure status by payment of delinquent franchise taxes (see Moran Enters., Inc. v Hurst, 66 AD3d at 976). Thus, the plaintiff’s loss of any claims against those attorneys was due to its own failure to pay the delinquent franchise taxes and to timely recommence the action against those attorneys (see CPLR 205[a]), and was not the result of Hurst’s delay in asserting the defense (see generally CPLR 203[f]; Pendleton v City of New York, 44 AD3d 733, 736; [*3]cf. Daughtry v Rosegarten, 180 Misc 2d 102, 103-104 [App Term 2d Dept]).”

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