Some courts hold that any claim against a “learned professional” must be analyzed via the lens of malpractice, legal, medical or professional.  This implies certain statutes of limitation, certain obligations of a professional and other differences between the professional and the lay person.  Here, in Sutherland v Fitzpatrick  2020 NY Slip Op 30029(U)  January 2, 2020
Supreme Court, Kings County Docket Number: 2090/2018 Judge: Lara J. Genovesi. the court is willing to allow those boundaries to become blurred.  Some of the claims are against the opposing attorney for representations made in a contract negotiation setting, some are for work performed thereafter, and some are alleged in regular negligence terms for work performed as an attorney.

“This action arises from plaintiffs purchase of the premises at 4029 Hylan Boulevard, Staten Island, New York, a restaurant/tavern formerly known as the Dugout South. Plaintiff, through Access Unlimited Corporation, purchased the property from Let the Good Times Roll, LLC (the seller). In this transaction, plaintiff was represented by a James D. Bonamassa, Esq. Defendant, Brian Sutherland, represented the seller.
Plaintiff understood the restaurant to have both an indoor and outdoor bar in the patio area. However, the outdoor “Tiki Bar” on the patio was not operating at the time of the negotiations. Plaintiff stated that in the spring of 2015, the seller told him that the outdoor bar was temporarily closed due to a property line dispute with the attorney’s office, located adjacent to the premises. According to plaintiff, this was confirmed by
defendant. Plaintiff believed that the outdoor bar could resume  operations once it was properly permitted (see NYSCEF Doc.# 32, Plaintiffs Affidavit in Opposition”

“On September 6, 2015 and September 9, 2015, complaints were filed by the community board regarding plaintiff’s use of the outdoor bar and patio area of the premises. On September 24, 2015, defendant submitted a letter to the Community Board, with an amended application, stating that plaintiff was withdrawing the portion of its application for a liquor license for the patio area. On October 8, 2015, the Community Board withdrew its objections to the liquor license application. On November 9, 2015, liquor license #1287661 was issued to the premises for the indoor areas.”

“As an initial matter, as plaintiff alleged “that the defendant made
misrepresentations of present facts that were collateral to the contract and served as an inducement to enter into the contract, a cause of action alleging fraudulent inducement is not duplicative of a breach of contract cause of action” (Did-it.com, LLC v. Halo Grp., Inc., 174 A.D.3d 682, 102 N.Y.S.3d 687 [2 Dept., 2019], citing Greenberg v. Meyreles,
155 A.D.3d 1001, 66 N.Y.S.3d 297 [2 Dept., 2017]). Here, accepting all the facts alleged in the complaint as true and according plaintiff the benefit of every favorable inference, plaintiff sufficiently plead a cause of action for fraudulent inducement.

The second amended complaint states that defendant represented that the premises had a liquor license for the patio area and that his prior affiliation would enable defendant to streamline the application process and get plaintiff a liquor license for the patio area. Plaintiff relied on this promise when purchasing and renovating the property. Defendants do not dispute that the premises never had a liquor license for the patio area. In fact, defendant alleges that plaintiff was aware of that fact, based on his testimony in the Richmond County action (see Memorandum of Law in Support at p 2), which was provided herein (see Notice of Motion, Exhibit 14).”

“Here, plaintiff’s fifth cause of action in the second amended complaint is not plead with specificity. Given the inconsistency in the prior pleadings and the arguments made herein, it is unclear what cause of action plaintiff attempts to state. To the extent that plaintiff’s fifth cause of action alleges legal malpractice or negligent  misrepresentation, it is insufficiently plead. It is undisputed that plaintiff retained defendants to procure liquor licenses for the premises. Although plaintiff specifically plead the existence of that
relationship in his third cause of action for breach of fiduciary duty, the fifth cause of action is silent as to the nature of the relationship between plaintiff and defendant. It neither states that a privity-like relationship or an attorney-client relationship existed. It further fails to allege that plaintiff would have been successful in getting a liquor license for the outside patio and would not have incurred financial damages, but for defendant’s negligence. However, to the extent that the fifth cause of action alleges general negligence, affording the complaint liberal construction, plaintiff sufficiently plead the
existence of a duty, breach, causation and damages. Accordingly, that branch of defendant’s motion to dismiss plaintiff’s fifth cause of action for “negligence” is denied. ”

Ramos v Goldberg, Scudieri & Lindenberg, P.C.  2020 NY Slip Op 30028(U) January 6, 2020 Supreme Court, New York County Docket Number: 160837/2016 Judge: Anthony Cannataro illustrates how courts review the materials and predict how the case would have come out “but for” the mistakes of the attorneys.  These but for examinations are very deep, and often result in the court undertaking very serious predictions of how other courts would have decided.

“Plaintiff, Raymond Ramos commenced this malpractice action against
defendants, his former attorneys and their law firm, who represented him in two separate cases pertaining to the cooperative apartment he formerly resided in. Defendants now move to dismiss the complaint pursuant to CPLR 3211, for failure to state a cause of action.

The underlying cases dealt with possessory rights to Apartment 4A of the cooperative building located at 4-6 West 105th Street in Manhattan. According to the cooperative’ s records, Patrick Millet was the shareholder of that apartment, but abandoned the apartment in the 1990s, and had since been subletting the premises to various individuals. In 2009 the cooperative commenced a holdover proceeding against the then occupants of the premises, which included plaintiff, to recover possession of the apartment. Plaintiff who had resided in the apartment since sometime in the 1990s, defended that the shares to the apartment were transferred to him in 1995. In 2011, while the holdover proceeding was ongoing, plaintiff commenced a Supreme Court action against the cooperative, seeking a declaration that he was the rightful shareholder of the apartment. ”

“Plaintiff has failed to plead a plausible cause of action for malpractice, as the allegations in the complaint are inherently incredible and/or flatly contradicted by documentary evidence. Contrary to plaintiff’s allegation, it was not obvious that the Court would determine that the action was time-barred. More importantly though, in its decision and order dated December 30, 2013, the Court specifically noted that even if
plaintiff’s claims had not been time-barred, there were numerous deficiencies in plaintiff’s evidence, and sufficient uncontested evidence, for the court to determine that there could not possibly have been a valid sale or transfer of cooperative shares to plaintiff.
Given the weight of the evidence considered by the Court, its decision also would not have changed had plaintiff called Anna Stern an additional witness. The Court found that there was overwhelming evidence such that even crediting plaintiff’s testimony at trial, he was never interviewed by the board, and could not possibly have acquired the shares. Ultimately, Supreme Court found that not only was plaintiff not a shareholder in the cooperative, his attempt to establish rights to the shares was the perpetration of a fraud:

The credible evidence adduced at this trial established that
the plaintiff, with the apparent assistance of his mother, not only disregarded that stated purpose [of the HDFC] but, in
fact, sought to, and did, personally profit from the HDFC by
improperly and deceitfully acquiring access to apartment 4A
and thereafter resided in the unit without paying
maintenance on any regular basis and, when he chose to
reside elsewhere, unlawfully sublet the apartment. He now
seeks to establish legal rights to the apartment with the aid
of the court in order to avoid eviction in the pending
housing court proceeding. The course of conduct exhibited
by the plaintiff will not be countenanced and, most certainly,
the court will not participate with the plaintiff to achieve
that end.

Lastly, as to plaintiff’s contention that his attorneys improperly linked the holdover proceeding to the Supreme Court action, even if a stipulation linking the two cases had not existed, the question of whether plaintiff was subject to eviction in the holdover proceeding necessarily depended upon whether plaintiff was found to be a
shareholder of the cooperative in the Supreme Court action.

As to plaintiff’s breach of fiduciary duty cause of action, that cause of action is duplicative of his legal malpractice cause of action. Therefore his complaint is dismissed in its entirety. ”

CPLR 203(d) is an ill-understood, mysterious saving statute that allows untimely counter-claims to be brought under certain circumstances.  It can be a saving statute for wildly out of statute counterclaims and acts as an offset to a claim.  The requirements are set forth in a recent opinion by Judge Schecter in Supreme Court, New York County. Capone v LDH Mgt. Holdings LLC 2020 NY Slip Op 30013(U) January 2, 2020 Supreme Court, New York County Docket Number: 651794/2015.

“Defendants’ contentions that their counterclaims are grounded in fraud or that plaintiffs deceptively caused them to wait until after 2014 to assert such claims ate baseless. To be sure, the limitations period for fiduciary duty claims involving fraud is six years plus two years from when a reasonable person knew or should have known about the fraud (Kaufman v Cohen, 307 AD2d 113, 119 [1st Dept 2003], see Aozora Bank, Ltd. v Credit Suisse Group, 144 AD3d 437, 438 [1st Dept 2016]). The fraud, however, must not be incidental to the breach of fiduciary duty (see Romanoff v Romanoff, 148 AD3d 614, 616 [1st Dept 2017]; Access Point Med., LLC v Mandell, 106 AD3d 40, 44 [1st Dept 2013] [“failure to disclose a conflict of interest does not transform a breach of fiduciary duty into a fraud”]). Additionally, a failure to disclose one’s own alleged wrongdoing does not toll the statute of limitations (Ross v Louise Wise Servs., Inc., 8 NY3d 478, 491 [2007] [“a plaintiff may not rely on the same act that forms the basis for the claim” to obtain a toll and there must be “some conduct on the part of the defendant after the initial wrongdoing; mere silence or failure to disclose the wrongdoing is insufficient”] [emphasis added]). Here, the alleged fraud is Scheinman’s “concealment of his disloyal dealings” (Dkt. 135 at 13; Dkt. 141 at 20). It is incidental to the alleged breach of fiduciary duty and there is no basis for any toll.

Nor can the counterclaims based on Scheinman’s alleged misconduct be used to set off defendants’ liability on his breach of contract claims. CPLR 203( d) provides that a counterclaim that “arose from the transactions, occurrences, or series of transactions or occurrences, upon which a claim asserted in the complaint depends (is) not barred to the extent of the demand in the complaint notwithstanding that it was barred at the time the claims asserted in the complaint were interposed.” The statute’s “arose from” language is interpreted strictly to exclude claims that merely “relate to” but do not actually “arise out of the same transactions or occurrences” (SCM Corp. v Fisher Park Lane Co., 40 NY2d 788, 792 [1976]; see Levy v Kendricks, 170 AD2d 387, 388 [1st Dept 1991]). Here, Scheinman’s conduct concerns the advice he allegedly improperly gave to Capone about the merits of the claims that Capone asserts in this action. While Scheinman’s alleged  malfeasance relates to Capone’s claims, it does not anse out of the transactions or occurrences giving rise to Capone’s claims – namely, the valuation used to compute his buy-out. The propriety of the advice does not turn on the validity of the valuation; it was advice, give after the fact, about how to challenge the valuation. Ergo, the advice merely
relates to the valuation. A set-off under CPLR 203( d), therefore, is impermissible (see Distribuidora De Discos Karen C. Por A. v Universal Music Group, Inc., 201 7 WL 1019697, at *6 [SDNY Mar. 15, 2017] [“While both claims implicate the 2006 Release Agreement, they will involve development of different facts and relate to different time periods and different actions by the parties. This is not a sufficient nexus to justify
application of section 203( d)”]). “

An attorney acts for the client.  More than three years passes from those acts, and the client wants to sue.  How does the statute of limitations apply, what acts by the attorney might extend the statute, and how does “fraud” play into the analysis?

Capone v LDH Mgt. Holdings LLC  2020 NY Slip Op 30013(U) January 2, 2020 Supreme Court, New York County Docket Number: 651794/2015
Judge: Jennifer G. Schecter  discusses these issues.

“Defendants’ contentions that their counterclaims are grounded in fraud or that plaintiffs deceptively caused them to wait until after 2014 to assert such claims ate baseless. To be sure, the limitations period for fiduciary duty claims involving fraud is six years plus two years from when a reasonable person knew or should have known about the fraud (Kaufman v Cohen, 307 AD2d 113, 119 [1st Dept 2003], see Aozora Bank, Ltd. v Credit Suisse Group, 144 AD3d 437, 438 [1st Dept 2016]). The fraud, however, must not be incidental to the breach of fiduciary duty (see Romano.ff v
Romanoff, 148 AD3d 614, 616 [1st Dept 2017]; Access Point Med., LLC v Mandell, 106 AD3d 40, 44 [1st Dept 2013] [“failure to disclose a conflict of interest does not transform a breach of fiduciary duty into a fraud”]). Additionally, a failure to disclose one’s own alleged wrongdoing does not toll the statute of limitations (Ross v Louise Wise Servs., Inc., 8 NY3d 478, 491 [2007] [“a plaintiff may not rely on the same act that forms the basis for the claim” to obtain a toll and there must be “some conduct on the part of the defendant after the initial wrongdoing; mere silence or failure to disclose the wrongdoing is insufficient”] [emphasis added]). Here, the alleged fraud is Scheinman’s “concealment of his disloyal dealings” (Dkt. 135 at 13; Dkt. 141 at 20). It is incidental to the alleged breach of fiduciary duty and there is no basis for any toll.”

Legal malpractice claims often consist of a specific claim of malpractice, a breach of fiduciary duty and a breach of contract.  In a setting (say, Connecticut and New York) where the acts occur in Connecticut and the attorney is sued in New York, the borrowing statute (CPLR 202) comes into play.  In Capone v LDH Mgt. Holdings LLC  2020 NY Slip Op 30013(U)
January 2, 2020 Supreme Court, New York County Docket Number: 651794/2015 Judge Jennifer G. Schecter explains:

“”When a nonresident sues on a cause of action accruing outside New York, CPLR 202 requires the cause of action to be timely under the limitation periods of both New York and the jurisdiction where the cause of action accrued” (Global Fin. Corp. v Triarc Corp., 93 NY2d 525, 528 [1999]). Defendants are Delaware LLCs with a principal place of business in Connecticut, which is where Scheinman worked for them and ommitted
the alleged malpractice (see Oxbow Calcining USA Inc. v Am. Indus. Partners, 96 AD3d 646, 651 [1st Dept 2012]). Though defendants’ counterclaims accrued in Connecticut, there is no need to address their timeliness under Connecticut law because they are clearly time-barred under New York law (see Veritas Capital Mgmt., L.L. C. v Campbell,
82 AD3d 529 [1st Dept 2011] [“breach of fiduciary duty claim is barred unless it is timely under the shorter of the New York or Connecticut statute of limitations”]). ”

“Defendants allege that Scheinman, while serving as their in-house counsel, provided legal advice to Capone that helped him strategically in asserting the claims that are the basis of this lawsuit. They state a claim for malpractice and breach of fiduciary duty–both of which have a three-year statute of limitations because defendants exclusively seek monetary damages (IDT Corp. v Morgan Stanley Dean Witter & Co., 12 NY3d 132, 139 [2009]; Matter of R.M Kliment & Frances Hals band, Architects, 3 NY3d
538, 541 [2004]). Defendants cannot recast the claim as one for breach of contract to avail themselves of the longer six-year limitations period (Johnson v Proskauer Rose LLP, 129 AD3d 59, 68 [1st Dept 2015], citing Kliment, 3 NY3d at 541-42; see Risk Control Assocs. -Ins. Group. v Lebowitz, 15.1 AD3d 527, 528 [1st Dept 2017]). It is. undisputed that Scheinman’ s conduct that gave rise to defendants’ counterclaims
. occurred in 2011, so by 2015, when this action was commenced, the counterclaims were time-barred.”

Sclafani v Kahn  2019 NY Slip Op 01115 [169 AD3d 846] February 13, 2019
Appellate Division, Second Department gives a good theoretical explanation of continuous representation and the underlying requirements of continuing trust and confidence as well as a shared understanding of the need for further work.

“An action to recover damages for legal malpractice must be commenced within three years of accrual, “regardless of whether the underlying theory is based in contract or tort” (CPLR 214 [6]; see McCoy v Feinman, 99 NY2d 295, 301 [2002]; Chase Scientific Research v NIA Group, 96 NY2d 20 [2001]; Quinn v McCabe, Collins, McGeough & Fowler, LLP, 138 AD3d at 1086; Alizio v Ruskin Moscou Faltischek, P.C., 126 AD3d at 735; Farage v Ehrenberg, 124 AD3d 159, 163 [2014]; Landow v Snow Becker Krauss, P.C., 111 AD3d at 796). “A cause of action to recover damages for legal malpractice accrues when the malpractice is committed, not when it is discovered” (Alizio v Ruskin Moscou Faltischek, P.C., 126 AD3d at 735; see McCoy v Feinman, 99 NY2d at 301; Quinn v McCabe, Collins, McGeough & Fowler, LLP, 138 AD3d at 1086; Farage v Ehrenberg, 124 AD3d at 164; Landow v Snow Becker Krauss, P.C., 111 AD3d at 796).

However, “[t]he continuous representation doctrine serves to toll the statute of limitations and render timely an otherwise time-barred cause of action for legal malpractice, but ‘only where there is a mutual understanding of the need for further representation on the specific subject matter underlying the malpractice claim’ ” (King Tower Realty Corp. v G & G Funding Corp., 163 AD3d 541, 543 [2018], quoting McCoy v Feinman, 99 NY2d at 306; see Alizio v Ruskin Moscou Faltischek, P.C., 126 AD3d at 735). For the doctrine to apply, “there must be clear indicia of ‘an ongoing, continuous, developing, and dependent relationship between the client and the attorney’ ” (Farage v Ehrenberg, 124 AD3d at 164, quoting Aseel v Jonathan E. Kroll & Assoc., PLLC, 106 AD3d 1037, 1038 [2013]; see Quinn v McCabe, Collins, McGeough & Fowler, LLP, 138 AD3d at 1086).”

WSA Group, PE-PC v DKI Eng’g & Consulting USA PC 2019 NY Slip Op 09339
Decided on December 26, 2019 Appellate Division, Third Department raises the interesting difference between a direct claim for professional negligence, common-law indemnity and contractual indemnity.

“In March 2012, plaintiff entered into a subcontract with defendant, a professional engineering firm, by which defendant agreed to inspect certain state bridges pursuant to plaintiff’s prime contract with the Department of Transportation (hereinafter DOT). The subcontract provided that the time period for defendant’s performance was January 1, 2012 through May 31, 2014, and included a provision requiring defendant to indemnify plaintiff for certain costs and expenditures arising from defendant’s errors, omissions or negligence. In March 2017, defendant’s employee, Akram Ahmad, was convicted of falsifying a 2013 inspection report for one of the bridges covered by the subcontract. As a result, plaintiff incurred costs related to cooperating in the investigation, providing information and appearing and testifying at administrative and judicial hearings, and was required to reimburse DOT for sums paid to defendant for Ahmad’s work. Defendant declined plaintiff’s request for indemnification of these costs.

In May 2018, plaintiff commenced this action against defendant stating causes of action in negligent supervision and breach of contract, and seeking to recover its expenditures arising from Ahmad’s misconduct. Defendant moved to dismiss the complaint as time-barred under CPLR 214 (6). Supreme Court granted the motion in part by dismissing the negligent supervision claim and the breach of contract claim to the extent that it was based upon defendant’s failure to properly inspect the bridge. The court partially denied the motion to dismiss the breach of contract claim to the extent that it was based upon defendant’s failure to comply with its contractual obligation to indemnify plaintiff for its reimbursement to DOT. To the extent that plaintiff sought indemnification for its counsel fees and costs related to investigations and judicial and administrative proceedings, the breach of contract claim was dismissed, as the court found that these were direct claims subject to the three-year limitations period of CPLR 214 (6), and were therefore time-barred. These cross appeals ensued.”

“Turning to plaintiff’s contractual indemnification claim, the subcontract required defendant to “indemnify and save harmless and defend [DOT and plaintiff] . . . from and against any claim, demand or cause of action of every name or nature arising out of the error, omission or negligent act of [defendant]” or its employees. Plaintiff alleged that defendant breached this provision by refusing to reimburse and indemnify plaintiff for the costs it incurred as a result of Ahmad’s misconduct. With regard to plaintiff’s claim for the reimbursement it paid to DOT for Ahmad’s work, Supreme Court determined that defendant’s voluntary contractual agreement to indemnify plaintiff was not an “ordinary professional obligation” of an engineer (Matter of R.M. Kliment & Frances Halsband, Architects [McKinsey & Co., Inc.], 3 NY3d at 542) and that this claim was thus governed by a six-year limitations period that accrued upon that payment and was not time-barred (see CPLR 213 [2]; McDermott v City of New York, 50 NY2d 211, 217-218 [1980]). We agree. The cause of action for indemnification is not “a disguised professional malpractice claim subject to a three-year statute of limitations, as it does not allege that [defendant’s] professional services were negligently performed, but instead alleges a breach of the [subcontract]” consisting of defendant’s separate failure to comply with its indemnification obligation (State of N.Y. Workers’ Compensation Bd. v Madden, 119 AD3d 1022, 1027 [2014]; see New York State Workers’ Compensation Bd. v SGRisk, LLC, 116 AD3d at 1151). Contrary to defendant’s argument, this conclusion is not altered by the fact that the complaint alleges that plaintiff incurred these costs “as a result of its negligent supervision of . . . Ahmad.” “[T]he indemnity claim is a separate substantive cause of action, independent of the underlying wrong” (McDermott v City of New York, 50 NY2d at 218). As such, the statute of limitations principles that apply to indemnification claims are controlling, “whatever the underlying breach of duty for which indemnification is sought” (id.; see Varo, Inc. v Alvis PLC, 261 AD2d 262, 264-265 [1999], lv denied 95 NY2d 767 [2000]).

We reject defendant’s argument that it cannot be required to indemnify plaintiff for its reimbursement to DOT for Ahmad’s work because DOT is also an indemnitee and, thus, is not a third party outside the subcontract. It is a familiar principle that a cause of action for common-law indemnification must be based upon a defendant’s breach of duty to a third party (see e.g. State of N.Y. Workers’ Compensation Bd. v Madden, 119 AD3d at 1024; Germantown Cent. School Dist. v Clark, Clark, Millis & Gilson, 294 AD2d 93, 99 [2002], affd 100 NY2d 202 [2003]). However, the instant matter does not involve common-law indemnification, in which “a contract to reimburse or indemnify is implied by law” (McDermott v City of New York, 50 NY2d at 217 [internal quotation marks and citation omitted]). Instead, the scope of defendant’s obligation is governed by the parties’ intent as revealed by the plain language of the indemnification provision that they agreed upon (see Matter of 2-4 Kieffer Lane LLC v County of Ulster, 172 AD3d 1597, 1601 [2019]; Crossroads ABL LLC v Canaras Capital Mgt., LLC, 105 AD3d 645, 645 [2013]). Nothing in the provision’s broad language, which requires defendant to indemnify plaintiff “against any claim, demand or cause of action of every name or nature,” reveals that the parties intended to exclude claims such as this from its coverage or to limit its scope to breaches of duty to third parties. Instead, the parties “chose to use highly inclusive language in their indemnification provision, which they chose not to limit by listing the types of proceedings for which indemnification would be required” (Crossroads ABL LLC v Canaras Capital Mgt., LLC, 105 AD3d at 646; accord HealthNow N.Y., Inc. v David Home Bldrs., Inc., 176 AD3d 1602, 1605 [2019]).

For the same reasons, we disagree with Supreme Court’s finding that the indemnification provision does not cover plaintiff’s counsel fees and other expenses incurred in the course of the investigation and subsequent proceedings arising from Ahmad’s misconduct. Like the claim for reimbursement of plaintiff’s payment to DOT, this claim is not subject to CPLR 214 (6), as it does not allege negligence in performing professional obligations and thus is not “essentially a malpractice claim” (Matter of R.M. Kliment & Frances Halsband, Architects [McKinsey & Co., Inc.], 3 NY3d at 542). Further, as previously discussed, the fact that plaintiff’s expenditures did not arise from a breach of duty to a third party does not exclude them from the scope of the parties’ broadly-phrased indemnification agreement. Nothing in the provision expressly excludes counsel fees or other direct expenditures on plaintiff’s part. On the contrary, the provision requires defendant to “indemnify and save harmless and defend” plaintiff (emphasis added), revealing that the parties contemplated legal costs arising from defendant’s errors, omissions or negligence as part of the provision’s scope.^[FN1] Accordingly, this aspect of plaintiff’s indemnification claim should not have been dismissed (see Matter of 2-4 Kieffer Lane LLC v County of Ulster, 172 AD3d at 1601; Crossroads ABL LLC v Canaras Capital Mgt., LLC, 105 AD3d at 646).”

People entering into a commercial transaction, buying into a business, for example, face a large number of potential investment problems.  These range from misunderstanding complex UCC documents, not obtaining proper shareholder rights, running afoul of the bulk transfer tax problem.  They reasonably retain attorneys to navigate these waters.  What happens when a law firm takes on the work with a severely limited retainer and problems thereafter arise?

Ferenets v Kenworthy  2019 NY Slip Op 33751(U) November 22, 2019
Supreme Court, Queens County Docket Number: 712299/2019
Judge: Cheree A. Buggs is an example of how the client loses in these situations.

“This action arises out of an attorney-client relationship that existed between Plaintiffs and  Defendants. Plaintifflryna Ferenets (individually referred to as “lryna”) alleges that as a licensed real estate broker she visited Roosevelt Island on numerous occasions because her brokerage office is located at 552 Main Street. She observed an already existing bubble tea business located at 559 Main Street and visited the shop on September 14, 2018. During Iryna’s visit she met with Guanghao Zhang (“Zhang”), who represented that he was the owner and operator of the business Sparkling Bubble Tea Inc. (hereinafter referred to as  Business”), and “briefly observed the operation of the business”. lryna alleges that the co-plaintiff her husband Alexander Ferenets expressed interest in becoming a manager of a bubble tea business. Subsequently, Plaintiffs met with Zhang and informed him of their interest. Zhang informed the Plaintiffs that he was looking for a partner and the Business was worth approximately $100,000. Plaintiffs and Zhang agreed that Plaintiffs would purchase 45 out of the 100 shares of the business for $45,000. On September 18, 2018, Plaintiffs visited the  Business and Zhang showed them a Shareholders Agreement signed the prior day illustrating that
Zhang held a 100% shareholder interest in the company and an individual named Shiwei Pan (“Shiwei”) held a 0 % interest.

Iryna represents that due to a referral and subsequent search of Defendants’ website the Plaintiffs decided to contact the Defendants seeking legal representation related to the purchase of the stock. On September 20, 2018, Plaintiffs contacted Defendants via phone and email. Iryna alleges on September 20, 2018 she forwarded the store lease including the rider, the Shareholders Agreement, the filing receipt of the business and the employer identification number for Defendants’ review. Plaintiffs entered into a retainer agreement with the Defendants on October 2, 2018 (hereinafter referred to as “Retainer Agreement”).”

“The relevant portions of the Retainer Agreement signed between the parties reads as follows:
1. Scope of Representation
This Jaw firm (“The Law Firm”) has been retained by both of you
(collectively “You”) to prepare the Shareholders Agreement for Sparkling Bubble Tea Inc. (the “Company”) that has already been formed with the New York State Department of State Division of Corporations. The Law Firm will be representing Your interests, not the interests of the Company or the other shareholder(s).
All of our services in this matter will end upon the preparation an execution of the Shareholders Agreement. Not included within the scope of our representation is tax or financial advice, any other transactional document, or the commencement of any litigation, which would be subject to a separate Retainer Agreement.”

“Plaintiffs allege Defendants failed to conduct and order a corporate lien search of the Business to ascertain corporate liens, judgments, obligations and liabilities and failed to determine whether the Business had any rent arrears and whether the lease was in full force and affect. Based upon the language in the Retainer Agreement there is no indication that Defendants had a duty to perform the above conduct. Nevertheless, Plaintiffs failed to establish causation. Iryna within her affidavit confirms that the Defendants agreed to purchase 45 shares of
the Business prior to retaining the Defendants. The Defendants paid $25,000 out of the agreed upon $45,000 purchase price for the shares prior to retaining the Defendants. Therefore, in light of the already existing agreement to purchase, Plaintiffs have failed to plead facts that indicate that Defendants’ lack of conduct caused the damages they allegedly sustained.
Finally, Plaintiffs allege Defendants failed to indicate who the Defendants represent in the Shareholders Agreement and failed to obtain information regarding Zhang’s citizenship. Plaintiffs have failed to establish a correlation between the above conduct and the damages they sustained. Nonetheless, within the Retainer Agreement Defendants state “[t]he Law Firm will be representing Your interests, not the interests of the Company or the other shareholder(s).” Plaintiffs
have not plead facts indicating that the either themselves or the other shareholders were unsure or unclear about who the Defendants represented. Furthermore, Plaintiffs have not plead facts that indicate how, if in anyway Zhang’s immigration status in this country affected the damages they allegedly sustained. Therefore it is,

ORDERED, that the Defendants’ motion is granted in its entirety. The Verified Complaint is dismissed.”