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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“Accordingly, it is hereby

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

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

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

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

This constitutes the decision and order of the Court.”