Some years ago there was a thriving cottage industry in creating tax shelters.  It took the IRS a few years to catch up, but it did so with a vengeance. Boesky v Levine 2021 NY Slip Op 02059 Decided on April 01, 2021 Appellate Division, First Department is the story of an attorneys travels through a number of firms and how the statute of limitations and continuous representation work to track him.

“The motion court properly dismissed as time barred the legal malpractice claims that pertain to legal services received from Levine and Herrick Feinstein from 2002-2005. The complaint does not allege that at the time defendant Levine provided legal services to plaintiffs regarding structuring and investing in the tax shelters from 2002-2005, the parties contemplated future services in connection therewith. Nor does the complaint contain allegations that there was continuous representation from 2002 forward regarding the structuring of the tax shelters (Johnson v Proskauer Rose LLP, 129 AD3d 59, 67-68 [1st Dept 2015]). However, the complaint sufficiently alleges that Levine subsequently represented plaintiffs in connection with audits by the Internal Revenue Service (IRS) and New York Department of Taxation and Finance (NYDTF) and in tax litigation continuously from May 16, 2008, the date Boesky signed a power of attorney permitting Levine to represent him before the NYDTF, through 2016. Whether the advice Levine allegedly dispensed with regard to the audits and litigation was provided solely in his capacity as tax matters partner for one of the limited liability companies in which plaintiffs invested, and not as their attorney, is an issue of fact that cannot be resolved on the pleadings.

The claim should also be reinstated against Herrick Feinstein (see Waggoner v Caruso, 68 AD3d 1, 6-7 [1st Dept 2009], affd 14 NY3d 874 [2010] [finding that sound policy considerations support the tolling of the statute of limitations under the continuous representation doctrine while the representation of the same matter in which the malpractice is alleged is ongoing]). This Court, in HNH Intl., Ltd. v Pryor Cashman Sherman & Flynn LLP (63 AD3d 534, 535 [2009]), held that the statute of limitations was tolled as to a malpractice claim against a law firm because the attorney(s) who handled the case continued to represent the plaintiffs in the same matter, albeit while at different law firms. Additionally, the claim should be reinstated against Moritt Hock for the period from September 2012 through 2016, when Levine was a partner at the firm and was [*2]allegedly still representing plaintiffs in connection with the audits and tax litigation. The complaint sufficiently alleges that Levine, while at Moritt, continued to advise plaintiffs regarding the tax litigation and sufficiently alleges that but for Levine’s continued failure to properly advise them of the weaknesses of their case, they would have settled with the IRS to reduce their financial exposure and litigation costs.

While the complaint sufficiently states a cause of action for fraud, it is time barred. The statute of limitations for fraud is the greater of six years from when the cause of action accrued or two years from when the fraud was discovered or with reasonable diligence should have been discovered (CPLR 213[8]). The cause of action for fraud accrued between 2002 and 2004 when plaintiffs entered into the allegedly fraudulent transactions (Kanterakis v Kanterakis, 125 AD3d 814, 816 [2d Dept 2015]; Hamrick v Schain Leifer Guralnick, 146 AD3d 606, 607 [1st Dept 2017], affg 2015 WL 5162542, at *4 [Sup Ct, NY County 2015]). Moreover, by 2014, plaintiffs were on notice that the IRS and NYDTF deemed the tax shelters in which they invested a tax avoidance scheme, that defendants Levine and Katz were self-dealing with regard to these tax shelters of questionable legitimacy that they promoted to plaintiffs, and that Levine was involved in other alleged illegal tax schemes. “Where the circumstances are such as to suggest to a person of ordinary intelligence the probability that he has been defrauded, a duty of inquiry arises, and if he omits that inquiry when it would have developed the truth, . . . knowledge of the fraud will be imputed to him” (Aozora Bank, Ltd. v Credit Suisse Group, 144 AD3d 437, 438 [1st Dept 2016], quoting Gutkin v Siegal, 85 AD3d 687, 688 [1st Dept 2011]). Here, plaintiffs had information suggesting they had been defrauded but failed to allege any facts demonstrating that they engaged in “the exercise of reasonable diligence.” Thus, knowledge of the fraud is imputed to plaintiffs (id. at 439-440), and because they did not commence this action until more than two years later, in February 2017, the fraud claim is time-barred. Moreover, since the fraud claim is time-barred, the claim for conspiracy to commit fraud, which is not an independent cause of action in New York, is not viable (EVEMeta, LLC v Siemens Convergence Creators Corp., 173 AD3d 551, 553 [1st Dept 2019]).”

In a very short affirmance, the First Department upheld the dismissal of what was a very long short case in Garr Silpe, P.C. v Gorman. 2021 NY Slip Op 01944 Decided on March 30, 2021 Appellate Division, First Department  .  Plaintiff hired her ninth attorney mid trial, and not surprisingly, did not do well at trial.  She sued, amended, amended again and asked to amend for the fourth try.  All was lost.

“Plaintiff was hired mid-trial, after defendant had been represented by eight prior law firms, and at times represented herself. Defendant’s conclusory allegations that plaintiff law firm failed to prepare for trial and gather evidence in her matrimonial action do not state a cause of action for legal malpractice (see Barbara King Family Trust v Voluto Ventures LLC, 46 AD3d 423, 424 [1st Dept 2007]; see generally Rosner v Paley, 65 NY2d 736, 738 [1985] [attorney’s “selection of one of among several reasonable courses of action does not constitute malpractice”]). Defendant’s retrospective complaints about plaintiff’s recommendations and trial are an insufficient basis to show that plaintiff’s decisions are actionable (Rodriguez v Fredericks, 213 AD2d 176, 178 [1st Dept 1995], lv denied 85 NY2d 812 [1995]). Nor does defendant allege facts that would establish that, but for plaintiff’s negligence, she would have obtained a more favorable result (Robson & Miller, LLP v Sakow, 121 AD3d 562, 563-564 [1st Dept 2014]). We note that we largely affirmed on appeal the trial court’s disposition (Gorman v Gorman, 187 AD3d 636 [1st Dept 2020]). Further, the breach of contract counterclaim is duplicative of the malpractice counterclaim.

The court properly denied defendant’s motions for leave to amend because the defects in the original pleading were not cured by either of the proposed amendments (Meimeteas v Carter Ledyard & Milburn LLP, 105 AD3d 643 [1st Dept 2013]).”

Plaintiff defended a suit by her attorneys seeking a contingent fee on the basis that they settled the case without her authorization.  Customarilly, these cases are a win for the attorney.  Not yet, in Silbowitz, Garafola, Silbowitz, Schatz & Frederick, LLP v Paravas 2021 NY Slip Op 01871
Decided on March 25, 2021 Appellate Division, First Department

“Defendant made a prima facie showing that she discharged plaintiff for cause after plaintiff settled her claim, allegedly without her authorization. Plaintiff merely raises an issue of fact as to defendant’s credibility and motive. The fact that defendant’s implied legal malpractice claim failed on causation or damages did not dispose of the issue of whether plaintiff was discharged for cause (e.g. Ulico Cas. Co. v Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d 1, 12-13 [1st Dept 2008]). The issue of whether plaintiff was discharged for cause prior to the completion of legal services cannot be determined on this record and a hearing is required (id. at 13; see Hee Jun Cheon Lee v Garcia, 80 AD3d 541, 541 [1st Dept 2011]). Should it be determined that defendant discharged plaintiff without cause, then plaintiff’s remedy would be the fair and reasonable value of its services as computed on a quantum meruit basis (see Nabi v Sells, 70 AD3d 252, 253-254 [1st Dept 2009]).”

How did you fall? is a question asked at any trip and fall case deposition of plaintiff.  Plaintiffs have to be carefully prepared to answer this question, as it can be awfully important.  Courts and juries like to hear certain phrases and descriptions.  A casual “I’m not sure” or other answer which does not specify the method of falling can kill a case.

Walker v Shaevitz & Shaevitz  2021 NY Slip Op 01799 Decided on March 24, 2021 Appellate Division, Second Department is a legal malpractice case filed after a personal injury case was dismissed for a vague answer.

“The Supreme Court, upon reargument, properly granted the law firm’s motion for summary judgment dismissing the complaint. “‘In moving for summary judgment dismissing a complaint alleging legal malpractice, a defendant must present evidence establishing, prima facie, that it did not breach the duty to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession, or that the plaintiff did not sustain actual and ascertainable damages as a result of such deviation'” (Dominguez v Mirman, Markovits & Landau, P.C., 180 AD3d 646, 647, quoting Mazzurco v Gordon, 173 AD3d 1003, 1003). Here, the law firm established its prima facie entitlement to judgment as a matter of law through the submission of the transcript of Walker’s deposition testimony in the underlying action which showed that she could not identify the cause of her fall (see Colini v Stino, Inc., 186 AD3d 1610, 1611; Ash v City of New York, 109 AD3d 854, 856) and that, even if the law firm had breached its duty to the plaintiffs, they would not have prevailed in the underlying action because Walker was unable to identify the cause of her fall without engaging in speculation (see Hamoudeh v Mandel, 62 AD3d 948, 949; see also Markowitz v Kurzman Eisenberg Corbin Lever & Goodman, LLP, 82 AD3d 719, 719).

In opposition, the plaintiffs failed to raise a triable issue of fact. Walker’s deposition testimony and affidavit in this action are contrary to her deposition testimony in the underlying action and merely raised a feigned issue of fact insufficient to defeat summary judgment (see Mallen v Dekalb Corp., 181 AD3d 669, 670; Dominguez v Mirman, Markovits & Landau, P.C., 180 AD3d at 648).”

Don’t rock the boat is often the wrong advice.  in LePatner Project Solutions LLC v 320 W. 115 St. 2021 NY Slip Op 01510 Decided on March 16, 2021 Appellate Division, First Department objecting made a big difference in an account stated situation.  Counterclaiming for legal malpractice also made a big difference.

“”[E]ither retention of bills without objection or partial payment may give rise to an account stated” (Morrison Cohen Singer & Weinstein, LLP v Waters, 13 AD3d 51, 52 [1st Dept 2004]). Here, plaintiff LePatner Project Solutions, LLC is entitled to summary judgment on its account stated claim against the limited liability corporation defendant only for project management invoices from May 19, 2017 through December 6, 2017, as defendants never timely objected to such invoices. Defendants’ vague assertion that they “raised” the issue with plaintiffs is insufficient to create an issue of fact (Kucker & Bruh, LLP v Sendowski, 136 AD3d 475, 476 [1st Dept 2016]; Zanani v Schvimmer, 50 AD3d 445, 446 [1st Dept 2008]).

While defendants also failed to timely object to plaintiffs’ legal services invoices rendered throughout 2017, defendants’ counterclaim for legal malpractice “is intertwined with . . . plaintiff law firm’s claim for legal fees,” precluding summary judgment on the claim with regard to the invoices for legal services (Emery Celli Brinckerhoff & Abady, LLP v Rose, 111 AD3d 453, 454 [1st Dept 2013], lv denied 23 NY3d 904 [2014]). Plaintiffs also are not entitled to summary judgment on their account stated claim insofar as it seeks payment of the December 19, 2017 additional services invoice, to which defendants timely objected on January 15, 2018 (see Healthcare Capital Mgt. v Abrahams, 300 AD2d 108 [1st Dept 2002]). Plaintiffs failed to establish their entitlement to summary judgment against the individual defendants.”

Sometimes with the statute of limitations staring at plaintiff, the question of whether the case is premature arises.  There is, of course, a conundrum.  Bring the case now (while the underlying case is still pending) and it is too early.  Wait for the underlying case to resolve, and it will be too late.

Aydiner v Karasik Law Group, P.C.  2021 NY Slip Op 30781(U) March 15, 2021 Supreme Court, Richmond County Docket Number: 151944/2020
Judge: Ralph J. Porzio resolves the issue in a manner fair to both parties.

“To state a cause of action for legal malpractice, a plaintiff must allege “(1) that the attorney ‘failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession,’ and (2) that the breach of this duty proximately caused the plaintiff to sustain actual and ascertainable damages.” Cervini v. Zanoni, 95 AD3d 919, 920 [2d Dept 2012]. (See Kahlon v. DeSantis, 182 AD3d 588 [2d Dept 2020]). “To establish the element of 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” Cervini v.
Zanoni, 95 AD3d 919, 920 [2d Dept 2012]. The key question in the instant Motion is whether Plaintiffs’ legal malpractice cause of action is premature based on Plaintiffs’ pending Order to Show Cause with respect to the Underlying Foreclosure Action. This Court finds that the answer to this question is yes.”

“This Court finds that since the elements of causation and damages in Plaintiffs’ legal malpractice cause of action are dependent on the outcome of the Order to Show Cause, such cause of action is premature and must be dismissed with leave to replead under CPLR §3211(a)(7).”

Hall v Hobbick 2021 NY Slip Op 01398 Decided on March 10, 2021 Appellate Division, Second Department illustrates the principle that no written retainer agreement is necessary for the formation of an attorney-client relationship.

“The Supreme Court erred in granting that branch of the third-party defendants’ motion which was pursuant to CPLR 3211(a)(1) and (7) to dismiss so much of the first cause of action as sought compensatory damages for legal malpractice in connection with the purchase of the Brooklyn property. Contrary to the third-party defendants’ contention, their submission of a retainer agreement between themselves and Hall failed to conclusively establish that no attorney-client relationship existed between the third-party defendants and Hobbick with respect to the purchase of the Brooklyn property by Hall and Hobbick (see CPLR 3211[a][1]). “[A]n attorney-client relationship does not depend on the existence of a formal retainer agreement” (Moran v Hurst, 32 AD3d 909, 911). Furthermore, the third-party complaint sufficiently alleged the existence of an attorney-client relationship between Hobbick and the third-party defendants, as well as the other elements of legal malpractice, including damages, which “may include litigation expenses incurred in an attempt to avoid, minimize, or reduce the damage caused by the attorney’s” negligence (Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 443 [internal quotation marks omitted]; see Mawere v Landau, 130 AD3d at 990). Accordingly, the Supreme Court should not have granted that branch of the third-party defendants’ motion which was to dismiss so much of the first cause of action as sought to recover compensatory damages for legal malpractice.”

Alrose Steinway, LLC v Jaspan Schlesinger, LLP  2021 NY Slip Op 30619(U) March 5, 2021Supreme Court, New York County Docket Number: 151482/2017 Judge: Andrea Masley is a long, reasoned and detailed discussion of a legal malpractice claim based upon a projection of future commercial events.  it is too long to effectively excerpt it for a blog entry.  The take-away from this case is that a “future profits” or projection of future losses based upon current events is tortious, twisted and requires many assumptions or (less positively) “speculations.”

“Defendants have also demonstrated that plaintiff’s theory of proximate cause is couched in gross speculations on future events. Defendants argue that plaintiff’s claims are wholly speculative and depend on too many uncertainties. Defendants point to the uncertainty associated with the requirement that plaintiff would be in compliance with all of its obligations under the ground lease before it could finally exercise the option in 2024. In support, defendants rely on Section 30.01 of the lease which states “[p]rovided that Tenant is not in material default beyond any applicable grace period … at the time of the exercise of this option to purchase, the Landlord grants to the Tenant … at any time during the last year of the term of this lease, the right to purchase the entire Premises leased hereunder.” (NYSCEF 156, Ground Lease§ 30.01 [emphasis added].)

Because plaintiff’s theory of proximate cause is based on the assumption that it would not have been in material default four years from now, and that it would have the funds to exercise the option four years from now, defendants maintain that the theory is ‘couched in terms of gross speculations on future events.”‘ (Phillips-Smith Specialty Retail Group II, 265 AD2d at 210.) Therefore, defendants posit that the theory is insufficient as a matter of law to establish proximate cause. (Id)
Defendants also maintain that plaintiff’s damages are speculative because whether plaintiff would be able to purchase the Premises four years from now in the amount of $11,000,000 is, by definition, speculation. Lastly, defendants contend that the damages as alleged are not clearly calculable because, although plaintiff orchestrated the purchase of the Premises four years ago for $14,500,000, it is unclear what, if any, purchase price would exist in 2024. (Gallet, Dreyer & Berkey, LLP, 141 AD3d at 406.) “