Xiuwen Qi v Hang & Assoc., PLLC 2024 NY Slip Op 33089(U) September 3, 2024 Supreme Court, New York County Docket Number: Index No. 151821/2023 Judge: Mary V. Rosado is a legal malpractice case arising from a wage and hour case which was dismissed for two reasons. The most immediate was the failure to attend a court conference. The more pervasive reason is “failing to abide multiple discovery orders.”

When a second attorney took over, the “successor counsel” issue arose. Where a successor attorney takes over the case, it is required that the successor attorney fix those problems that can be fixed. Legal malpractice claims against the first attorney are only viable where the successor counsel could not fix the problem.

“This is a legal malpractice action which Plaintiff Xiuwen Qi has asserted against his former attorneys (NYSCEF Doc. 2). Defendants/Third-Party Plaintiffs represented Plaintiff in a wage and hour lawsuit (see Xiuwen Qi v Famous Sichuan New York Inc., Index No. 656826/2019) (the “Dismissed Action”). After failing to abide multiple discovery orders, Plaintiff, while represented by Defendants/Third-Party Plaintiffs, had his case dismissed. A motion seeking to restore Plaintiffs case to the trial calendar and to vacate Plaintiffs default was ultimately denied for failure to provide a reasonable excuse and meritorious defense.
Plaintiff then retained Third-Party Defendants to represent him in the instant malpractice action and to prosecute his wage and hour claims in a new action (see Xiuwen Qi v Famous Sichuan New York Inc., Index No. 650984/2022) (the “New Action”). The New Action faced a motion for summary judgment based on the statute of limitations and the judge presiding in that case ruled that any claims accrued prior to March 2, 2016 were barred by the statute of limitations. There remains pending in the New Action a motion to renew based on clarification of the impact Governor Cuomo’ s Covid-19 Emergency Executive Orders had on the statute of limitations.”

“The Court finds that the allegations regarding failing to raise the Covid-19 toll, prior to it being settled law in the First Department, and while a motion to renew is sub Judice, cannot serve as a basis for a contribution claim against Third-Party Defendants. As a preliminary matter, these allegations are not ripe for adjudication as there remains a pending motion to renew, where Third­ Party Defendants brought to the Court’s attention the application of the Covid-19 toll once the case law was settled in the First Department (Parent Teacher Ass ‘n of P.S. 124M v Board of Educ. Of City School Dist. Of City of New York, 138 AD2d 108 [1st Dept 1988] [controversy cannot be ripe if claimed harm may be prevented or significantly ameliorated by further administrative action]).
It is total speculation that Plaintiff has been damaged as Plaintiff has not yet been definitively barred from having some of his claims restored pursuant to the Covid•19 toll (Pellegrino v File, 291 AD3d 60, 63 [1st Dept 2002], lv denied 98 NY2d 606 [2002]).
Moreover, the statute of limitations is mandatory and not discretionary, and as the law in the First Department regarding application of the Covid-19 toll has now been settled, Plaintiffs claims will likely be restored in the New Action (see Murphy v Harris, 210 AD3d 410 [1st Dept 2022]). Thus, Defendants/Third-Party Plaintiffs claims for contribution arising out of alleged malpractice for failure to raise the Covid-19 toll are dismissed.”

Jingyi Ni v Shenlaw, LLC 2024 NY Slip Op 51148(U) Decided on August 1, 2024 Supreme Court, New York County Lebovits, J. is a fascinating case. To start it is not really a legal malpractice case, and might have been brought for the purpose of saving an EB5 immigration application rather than for money damages.

Nevertheless, the facts are startling, and Judge Lebovits’ decision is so shocking, that it requires a full read for the facts. Here are some of the highlights:

“In December 2022, plaintiff, Jingyi Ni, brought this action for declaratory judgment against defendant Shenlaw, LLC, and its sole member and principal, defendant Jianming Shen,, based on an alleged breach of fiduciary duty. Ni now moves to strike defendants’ answer, for the entry of declaratory judgment in his favor, and for punitive damages and attorney fees. (See NYSCEF No. 78.) The motion is granted in part and denied in part.

BACKGROUND

In January 2014, Ni retained Shen to assist Ni with filing an EB-5 Immigrant Investor Program petition. (NYSCEF No. 51 at ¶ 24; NYSCEF No. 49 at ¶ 2.) In March 2014, Shen submitted the EB-5 petition on Ni’s behalf. (NYSCEF No. 49 at ¶ 4; NYSCEF No. 51 at ¶ 33.) [*2]Ni claims that he was not given a copy of the petition at the time. (NYSCEF No. 49 at ¶ 4; NYSCEF No. 51 at ¶¶ 33, 36.)

Several years later, in November 2019, Ni filed an application to register as a permanent resident. (NYSCEF No. 49 at ¶ 14; NYSCEF No. 51 at ¶ 49.) But in October 2022 Ni received a notice of intent to deny (NOID). The NOID indicated that Ni’s application to register as a permanent resident would be denied, because the United States Citizenship and Immigration Services (USCIS) determined that Ni had submitted false documents in his EB-5 petition. (NYSCEF No. 49 at ¶ 13; NYSCEF 51 ¶ 50.)

Ni later learned that Shen had submitted false source-of-funds documentation in connection with Ni’s EB-5 petition. (NYSCEF No. 51 at ¶¶ 51-53.) This is undisputed. Shen admits that the source-of-funds materials were false and that Ni is “100% innocent.” (NYSCEF No. 56; NYSCEF No. 79 at 1-2.) But the parties disagree on the extent of Shen’s culpability. Shen claims that he engaged non-party TPC, Inc., to prepare the materials for Ni’s EB-5 petition. (NYSCEF No. 56; NYSCEF No. 79 at 1-2.) Shen claims that TPC’s owner, Taiping Chen, created the fabricated materials. (NYSCEF No. 79 at 1, 6; NYSCEF No. 52 at ¶ 56; NYSCEF No. 56.) Shen claims that his responsibility is limited to “having believed Taiping Chen’s work products to be true and credible.” (NYSCEF No. 79 at 6.) Ni disputes this; he alleges that Shen himself created the false documents. (See e.g. NYSCEF No. 51 at ¶¶ 45, 59-61, 66.)

In the current motion, Ni claims that Shen has perpetrated fraud on the court by committing perjury, fabricating evidence, and destroying evidence. Ni urges the court to strike defendants’ answer and enter default judgment in Ni’s favor. Ni also seeks an award of punitive damages and attorney fees (NYSCEF No. 78 at 27-28.)”

“

A. Fraud on the Court

A court has the power to strike pleadings and enter default judgment in response to “clear and convincing evidence” of fraud on the court. (See CDR Créances S.A.S. v Cohen, 23 NY3d 307, 311 [2014].) This power derives from CPLR 3126 and the court’s “inherent power to address actions which are meant to undermine the truth-seeking function of the judicial system.” (Id. at 318.) To warrant such an extreme sanction, the fraudulent conduct must be pervasive and concern “issues that are central to the truth-finding process.” (Id. at 320, quoting McMunn v Memorial Sloan-Kettering Cancer Ctr., 191 F Supp 2d 440, 445 [SD NY 2002].) Ni alleges that Shen has perpetrated on the court a fraud that warrants striking defendants’ answer. Specifically, Ni alleges that Shen fabricated two documents produced in discovery and committed perjury through his sworn statements related to those documents.

Ni bears the burden of proving the alleged fraudulent conduct by clear and convincing evidence. (Id.) “The clear and convincing evidence standard is satisfied when the party bearing the burden of proof has established that it is highly probable that what he or she has claimed is actually what happened.” (Home Ins. Co. of Ind. v Karantonis, 156 AD2d 844, 845 [3d Dept 1989].) Ni has satisfied that burden.

In his first request for production, Ni asked Shen to produce any prior communications [*3]with TPC or Taiping Chen. In response, Shen produced two documents labeled Defendants’ Exhibits 4.4 and 4.5. (See NYSCEF No. 63 at 8-10; NYSCEF No. 61; NYSCEF No. 62.) In Shen’s response to plaintiff’s second deficiency letter, Shen stated that these documents were “print-to-PDF” copies of emails he had sent via a Yahoo email account to Taiping Chen on February 27, 2014, and March 5, 2015, respectively. (NYSCEF No. 64.) Each document includes a footer with a date and time stamp corresponding to the dates Shen claimed to have sent the emails. (See NYSCEF No. 61; NYSCEF No. 62.) Shen stated that he had converted each email to PDF on the same day displayed in the footer of each document. (NYSCEF No. 64.)

Shen was questioned extensively about the documents during his August 16, 2023, deposition. Consistent with his written responses, Shen testified that he had sent and converted each email on the date shown in its the respective footer. (See e.g. NYSCEF No. 17 at 66:24-67:7, 70:13-71:14.) Ni’s counsel then showed Shen the affidavit of Michael Bierut, a designer who worked on the 2019 rebranding of Yahoo’s logo. (See id. at 76:5-15; NYSCEF No. 65.) Bierut’s affidavit states that the Yahoo logo, which appears in Defendants’ Exhibits 4.4 and 4.5, did not exist until 2019. (NYSCEF No. 65 at ¶¶ 4, 9.) After being shown Bierut’s affidavit, Shen said at the deposition that he was “withdraw[ing]” his prior testimony related to the documents. He then refused to answer any further questions about them. (See NYSCEF No. 53 at 82:4-86:12.)

Shen has since conceded that Bierut is credible; and he does not challenge Bierut’s affidavit. (NYSCEF No. 68 at ¶ 10; NYSCEF No. 79 at 8.) Instead, Shen states that he now believes that the emails must have been converted to PDF sometime after September 2019. (NYSCEF No. 68 at 12-13.) Shen claims that after the deposition he recalled that some computers in his office “automatically backdated” documents. (NYSCEF No. 68 at ¶ 11; NYSCEF No. 79 at 9.) Shen suggests this “automatic backdating” explains the discrepancy between date/time stamps and the logos. Shen further claims that his prior false statements are the result of a chronic memory problem, stemming from a head injury he suffered nearly 40 years ago. (NYSCEF No. 68 at ¶¶ 1-3.)

During oral argument on this motion, Shen offered to speak on these matters under oath. The court swore him in. The court finds Shen’s new (sworn) explanations incredible. As Ni notes, Shen testified at his deposition that his only memory problems were those normally caused by age. (NYSCEF No. 53 at 12:9-16.) And Shen has not produced any evidence of his supposedly decades-long serious memory problem.^[FN1] Furthermore, an affidavit submitted by Ni’s forensics expert notes that it is “highly improbable” that the computers would have automatically backdated the documents to dates “coincidentally aligning with the specific dates that support [Shen’s] position.” (NYSCEF No. 66 at ¶ 7.) Shen has not offered any explanation for how the “automatic backdating” coincides with the events at issue in this case.

Ni has satisfied the burden of showing by clear and convincing evidence that Defendants’ Exhibits 4.4 and 4.5 are fabricated. The inconsistency between the 2019 Yahoo logo and the date stamps on the two documents make it highly probable that Defendants’ Exhibits 4.4 and 4.5 are [*4]fabricated. The probability that Defendants’ Exhibits 4.4 and 4.5 are fabricated is further strengthened by other authenticity concerns. On their face, the documents are drafts, not sent emails, as Shen has represented them to be. (See e.g. NYSCEF No. 53 at 65:19-66:18; NYSCEF No. 66 at ¶ 5.) At Shen’s deposition, Ni’s counsel also noted that the documents appeared to be screenshots, rather than PDFs. (See NYSCEF No. 55:25-56:7.) These inconsistencies, together with the anachronistic logo, convincingly prove Ni’s showing that the documents were fabricated.

The court also finds that Ni has shown by clear and convincing evidence that Shen’s sworn statements relating to Defendants’ Exhibits 4.4 and 4.5 were perjurious. The only explanation for Defendants’ Exhibits 4.4 and 4.5 is that Shen himself fabricated them. Shen has repeatedly attested to their authenticity in both written and oral sworn statements. (See e.g. NYSCEF No. 64 at 1-2; NYSCEF No. 53 at 58:17-59:24.)

Shen’s pervasive and fraudulent conduct relates to central issues in this case. Shen does not dispute that he submitted fraudulent source-of-funds documents in connection with Ni’s EB-5 application. Shen disputes only Ni’s allegation that Shen fabricated the source of funds documents. Shen’s defense in the underlying action is that TPC and Taiping Chen were responsible for creating the fraudulent documents submitted in Ni’s EB-5 application. Defendants’ Exhibits 4.4 and 4.5 are the only support for Shen’s claim that TPC, rather than Shen, prepared those fraudulent documents. (See NYSCEF No. 53 at 4-16.) Therefore, the authenticity of Defendants’ Exhibits 4.4 and 4.5 is relevant to a central issue in this case. Shen’s fraudulent conduct warrants striking defendants’ answer.”

Law firms frequently insert arbitration clauses into their retainer agreements, and require arbitration of all claims concerning potential malpractice. In an unusual setting, the clients sue their attorneys for failing to tell them to basically do the same thing,

Signature Cleaning Servs., Inc. v Grimaldi 2024 NY Slip Op 32966(U) August 23, 2024 Supreme Court, New York County Docket Number: Index No. 157238/2021 Judge: Judy H. Kim is a case in which “Plaintiff Signature Cleaning Services, Inc. (“Signature”) alleges that defendants—plaintiff’s former law firm and its lawyers—engaged in malpractice by failing to advise plaintiff to require its employees to sign arbitration agreements and class action waivers as a condition of their employment (NYSCEF Doc No. 6 [Compl. at ¶8]). Plaintiff asserts that, as a result, its employees were able to file a class action lawsuit against plaintiff in New York State Supreme Court asserting violations of New York State’s Labor Law and the Fair Labor Standards Act (“FLSA”) (the “Class Action”), which plaintiff ultimately settled for over one million dollars (Id. at ¶¶9-12).”

“Defendants now move for summary judgment dismissing this action, submitting affirmations from members of the defendant law firm, Carmelo Grimaldi, and Thomas J. McGowan, attesting that “it was strategically determined that [p]laintiff would not provide rbitration and class action waiver agreements to [plaintiff’s employees because, inter alia, the expense of addressing potentially a thousand or more individual arbitration demands by current and former employees would greatly exceed the likely cost of settling a class action lawsuit involving those same former and current employees” (NYSCEF Doc. Nos. 13 [Grimaldi Affirm. at ¶7] and 14 [McGowan Affirm. at ¶21]). Defendants also submit an affirmation by Raymond Nardo, Esq., an expert in Employment Law, attesting that defendants did not fail to exercise the ordinary reasonable skill and knowledge in employing this strategy and notes that if the Class Action plaintiffs had proceeded through arbitration, the costs to Signature from filing fees alone would have been substantially greater than the settlement of the Class Action (NYSCEF Doc. No. 32 [Nardo Affirm. at ¶¶9-11, 18]). Defendants argue that the foregoing establishes that plaintiff will not be able to prove its prima facie case and seek the dismissal of this action and sanctions pursuant to 22 NYCRR §130-1.1.1”

“In this case, defendants have established that they were not negligent in advising plaintiff not to mandate that its employees execute arbitration agreements and class action waivers and, in any event, this advice was not the proximate cause of plaintiff’s losses.
To wit, the affirmations of Grimaldi, McGowan, and Nardo establish that defendants’ advice was reasonable (See Yang v Pagan Law Firm, P.C., 228 AD3d 547, 547-48 [1st Dept 2024] [“Defendants met their prima facie burden on a motion for summary judgment by submitting the affidavit of their legal expert, who averred that defendants did not depart from the applicable standard of care”]; see also Orchard Motorcycle Distributors, Inc. v Morrison Cohen Singer & Weinstein, LLP, 49 AD3d 292, 292-93 [1st Dept 2008]), and it is well-settled that an attorney’s “selection of one among several reasonable courses of action does not constitute malpractice” (Rosner v Paley, 65 NY2d 736, 738 [1985]).
Defendants have also established that plaintiff cannot prove that their advice was not the proximate cause of the harm alleged by plaintiff. “To establish causation, a plaintiff must show that he or she would have prevailed in the underlying action or would not have incurred any damages, but for the lawyer’s negligence” (Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442 [2007] [internal citations omitted]). However, “[c]ontentions underlying a claim for legal malpractice which are couched in terms of gross speculations on future events … are insufficient as a matter of law to establish that defendants’ negligence, if any, was the proximate cause of [plaintiff’s] injuries” (Phillips-Smith Specialty Retail Group II, L.P. v Parker Chapin Flattau & Klimpl, LLP, 265 AD2d 208, 210 [1st Dept 1999]”

“This speculation on a hypothetical sequence of events is insufficient to establish causation on a malpractice claim (See Brooks v Lewin, 21 AD3d 731, 734-35 [1st Dept 2005] [plaintiff’s assertion “that a number of events which occurred after she severed her relationship with MSI could have been prevented if the law firm made the motion for the injunction” was “speculation on future events” and therefore insufficient to establish that the defendant lawyer’s malpractice, if any, was a proximate cause of any such loss”]; see also Kaplan v Conway and Conway, 173 AD3d 452, 452-53 [1st Dept 2019] [allegations that plaintiffs were subject to a FINRA investigation because defendants failed to timely advocate for a “formal closure” of an internal investigation by plaintiffs’ employer or secure “more favorable language” in FINRA U-5 Forms filed upon plaintiffs’ resignation were vague, speculative, conclusory and failed to “fit [into] any cognizable legal theory”]).”

Reem Contr. v Altschul & Altschul 2024 NY Slip Op 32915(U) August 19, 2024 Supreme Court, New York County Docket Number: Index No. 104202/2011 Judge: David B. Cohen presents the interesting question of whether a party may make a second motion for summary judgment, and if so, under what circumstances. Here, Defendants are denied a second motion and plaintiffs are permitted a second motion. Neither succeeds on summary judgment.

“This is a legal malpractice action brought by plaintiffs Reem Contracting Corp. (Reem Contracting), Jona Szapiro (Szapiro ), Reem Plumbing and Heating Corp. (Reem Plumbing), and the Estate of Steven Stein (Stein) ( collectively, plaintiffs) against defendants Altschul & Altschul, Mark Altschul, Esq. (Altschul), and Cory Dworken, Esq. (Dworken) ( collectively, defendants). Defendants represented plaintiffs in a federal action seeking recovery under section 515 of the Employee Retirement Income Security Act of 1974 (ERISA), 29 USC§ 1145 (the underlying action). Defendants move, pursuant to CPLR 3212, for summary judgment: (1) dismissing the complaint; and (2) granting judgment on their counterclaims for an account stated (motion sequence number 016).”

“Defendants again move for summary judgment, arguing that they have good cause for their second motion for summary judgment, relying on Executive Order No. 202.9 (9 NYCRR 8.202.8), issued during the COVID-19 pandemic, which allegedly prevented them from filing their motion until after the deadline to file motions had already expired. Further, defendants maintain that, as the court previously held that plaintiffs’ expert report was not in admissible form, plaintiffs do not have an expert opinion that they can rely on to prove their case, and plaintiffs previously conceded that the Reem entities were alter egos of each other. In response, plaintiffs contend that defendants have failed to demonstrate good cause for their second motion for summary judgment, as their initial motion for summary judgment was timely filed in compliance with the court’s deadline of February 28, 2020. They assert that defendants should have raised the purported admission that the Reem entities were alter egos in opposition to plaintiffs’ first motion for summary judgment. Finally, plaintiffs maintain that defendants have failed to obtain an expert and cannot serve as their own expert witness, and, thus, are unable to meet their burden of proving that plaintiffs’ legal malpractice claim is without merit.

“‘Successive motions for summary judgment should not be entertained without a showing of newly discovered evidence or other sufficient justification”‘ (Maggio v 24 W 57 APF, LLC, 134 AD3d 621, 625 [1st Dept 2015], quoting Jones v 636 Holding Corp., 73 AD3d 409,409 [1st Dept 2010]; see also Pough v Aegis Prop. Servs. Corp., 186 AD2d 52, 53 [1st Dept 1992] [“[A]s a matter of policy, multiple summary judgment motions are discouraged in the absence of newly discovered evidence or ‘other sufficient cause”‘]).”

“A party seeking summary judgment should anticipate having to lay bare its proof and should not expect that it will readily be granted a second and third chance”] [internal quotation marks omitted]). Accordingly, defendants’ motion for summary judgment is denied.”

“Plaintiffs contend that they have good cause for their second motion, as the court previously denied their motion primarily because their expert report was unswom. They now submit an affidavit from their expert, Bennett J. Wasserman, which annexes his report offered on the prior motion (NYSCEF Doc No. 359, Wasserman aff), and Wasserman opines therein that defendants’ conduct fell below the standard of care in the underlying action in that, among other things: (1) defendants failed to investigate and marshal appropriate lay and expert evidence in a timely fashion; (2) defendants stipulated to the fact that the Reem entities were alter egos, notwithstanding the fact that Stein testified to the contrary; (3) defendants never advised plaintiffs about the existence of potential conflicts of interest; and ( 4) defendants failed to communicate with plaintiffs (id., ,i 10 [c], [d], [e], [f], [k]).”

“Here, plaintiffs have demonstrated good cause for their second motion for summary judgment (see Darwick v Paternoster, 56 AD3d 714, 715 [2d Dept 2008]), as the prior denial was based, in part, on the fact that their expert report was unswom and therefore inadmissible. Now, plaintiffs have, in effect, moved to renew their prior motion for summary judgment to correct a procedural oversight and have submitted their expert’s affidavit in admissible form (see Feuerman v Marriott Intl., 201 AD3d 566, 567 [1st Dept 2022]; Shaw v Looking Glass Assoc., 8 AD3d 100, 102 [1st Dept 2004]). The court, therefore, must determine whether plaintiffs are entitled to summary judgment.”

“Even considering Wasserman’s affidavit, the court finds that plaintiffs are still not entitled to summary judgment. First, there are issues of fact as to proximate cause (see Birnbuam v Misiano, 52 AD3d 632, 634 [2d Dept 2008]). Plaintiffs argue that by conducting their own informal audit, they “met the proximate cause element of this litigation, through the ‘case within a case’ standard, as they successfully refuted the Funds’ audit and refuted the uncontested judgment against Plaintiffs” (NYSCEF Doc No. 360 at 28). However, they concede that the audit is inadmissible at trial, and thus, as previously held on plaintiffs’ first summary judgment motion, the audit is insufficient to demonstrate proximate cause (see CPLR 4547; CNP Mech., Inc. v Allied Bldrs., Inc., 66 AD3d 1340, 1340 [4th Dept 2009] [subcontract summary prepared by defendants’ counsel “was prepared for the purpose of settlement negotiations and was therefore inadmissible as proof of the amount of damages”]). “

Csutkai v Baisley 2024 NY Slip Op 32884(U) August 15, 2024 Supreme Court, New York County Docket Number: Index No. 151083/2020 Judge: Debra A. James is an odd example of blaming the attorney where the attorney never agreed to take on certain work.

“This action arises out of a promissory note, dated August 17, 2007, executed by non-party Donald Baechler (“Baechler”) to memorialize a debt of $250,0000 owed by Baechler to Edit Deak, now deceased ( the “Note”) . (NYSCEF Doc. No. 004.) Non-party Baechler does not deny the existence of the Note, and it is undisputed that the Note was not paid. The plaintiff Daniel Csutkai, as Administrator of the Estate of Edit Deak (“Csutkai”), commenced this action against the defendants Margaret Baisley and Baisley Law Group, P.C. (collectively, “Baisley”) seeking damages arising from the nonpayment of the Note. Baisley represented both Baechler and Deak on the Note transaction. Despite the conflict, Deak agreed to the representation, pursuant to a conflict waiver executed by Deak (the “Waiver”). (NYSCEF Document Number 013). Prior to his filing of the instant action, Csutkai commenced an action entitled Csutkai v Baechler, Index No. 651615/2018, in which he sought payment of the Note (the “Baechler Action”). The Baechler Action was discontinued, with prejudice, by stipulation dated March 26, 2021. (Csutkai v Baechler, Index No. 651615/2018, NYSCEF Document Number 032.)”

“The allegations of legal malpractice fail to identify how Baisley was negligent. Cstukai fails to allege that Baisley was ever instructed by Deak to enforce the Note or to seek recovery of the amount due thereunder, or that Baisley otherwise had a duty to do so under the legal engagement. Furthermore, to the extent that Cstukai alleges that Baisley willfully allowed the statute of limitations to expire, this court ruled in the Baechler Action, by Order dated November 1, 2019, that the claim for payment of the Note was still viable and not time-barred under General Obligations Law§ 17-101. (Csutkai v Baechler, Index No. 651615/2018, NYSCEF Document Number 016.) Thus, Cstukai fails to allege any factual basis for tort liability against Baisley. Accordingly, the first cause of action for legal malpractice must be dismissed. Gopstein v Bellinson Law, LLC, 227 AD3d 465 (1st Dept 2024).”

In Jobar Holding Corp. v Halio 2024 NY Slip Op 32650(U) July 10, 2024 Supreme Court, New York County Docket Number: Index No. 655689/2017 Judge: Joel M. Cohen, plaintiff attempted to use a subsequent case decision to revive a dismissed case via amendment, The attempt failed.

“By order dated September 23, 2019, the Court (Scarpulla, J.) dismissed without prejudice Plaintiffs Complaint as against T &E for aiding and abetting fraud, aiding and abetting breach of fiduciary duty, accountant malpractice, fraud, and negligent misrepresentation due to the “mixing of derivative and individual claims … ” (Johar Holding Corp. v Halio, 2019 N.Y. Slip Op. 32813[U], 7 [N.Y. Sup Ct, New York County 2019]). Plaintiffs subsequently filed an Amended Complaint asserting claims against T &E for Civil RICO, fraud, aiding and abetting fraud, aiding and abetting breach of fiduciary duty and breach of the covenant of good faith and fair dealing. By order dated October 7, 2020, the Amended Complaint was dismissed as against T &E on the grounds that the RICO claims were conclusory; that Plaintiffs continued to mix derivative and individual claims; and because certain claims were untimely (NYSCEF 184, NYSCEF 235 [Transcript at 41-466). Plaintiffs now move for leave to amend on based on the First Department’s decision in 1650 Broadway Assoc., Inc. v Sturm, 210 NYS3d 19 [1st Dept 2024] [“1650 Broadway”]). In 1650 Broadway, the First Department reinstated claims for accounting malpractice and aiding and abetting fraud based on allegations that the defendant did not comply with the “standard of a reasonable accountant under similar circumstances … ” (id.). Plaintiffs argue that their Third Amended Complaint (NYSCEF 280) seeking to re-assert claims from their previously dismissed Complaint and Amended Complaint should be accepted because it pleads claims consistent with those in 1650 Broadway. T &E was not served with a copy of the motion to amend. However, T &E learned of the motion in connection with Plaintiffs request for an extension of time to perfect an appeal. T &E subsequently submitted a letter dated July 1, 2024, in opposition to Plaintiffs motion.

While styled as a motion to amend, Plaintiffs motion is actually a motion to reargue the Court’s prior dismissal order based on new case law (Mears v Chrysler Fin. Corp., 243 AD2d 270,272 [1st Dept 1997] citing George W Collins, Inc. v Olsker-McLain Indus., Inc., 22 AD2d 485,488 [4th Dept 1965] [a motion affecting a prior order must be made pursuant to CPLR 2221 ]). CPLR 2221 ( e )(2) provides, in relevant part, that the Court may grant leave to renew if the movant can “demonstrate there has been a change in the law that would change the prior determination … ” A new decision that applies existing law is not a “change in the law” that warrants renewal (Kreisler v B-U Realty Corp., 198 AD3d 568, 568 [1st Dept 2021]). Similarly, a new decision that is decided on inapposite facts is not sufficient to warrant renewal (Lucente v Riverbay Corp., 58 AD3d 451,452 [1st Dept 2009]). Contrary to Plaintiffs assertions, 1650 Broadway, does not warrant renewal or leave to amend. 1650 Broadway applied the law as it existed at the time of the Court’s dismissal order and does not concern derivative claims or timeliness concerns. Accordingly, leave to renew and leave to amend are not warranted.”

Slifka v Paul, Weiss, Rifkind, Wharton & Garrison, LLP 2024 NY Slip Op 32788(U) August 9, 2024 Supreme Court, New York County Docket Number: Index No. 155742/2023 Judge: Melissa A. Crane is yet another in the vast universe of legal malpractice cases associated with real estate, and in this case in a big way. Joseph Slifka constructed a building at 477 Madison Avenue and in 1954 made provisions for his wife and children through trusts. Today, the trusts and the individuals are mired in litigation over the sale of that building and the ground lease associated with it.

The details are too involved to set forth in this blog post, but here is a short portion of them. “Joseph constructed a commercial office building on land at 4 77 Madison A venue (the Property), and in 1954, he divided the property interests in two – the Fee, comprised of the land and the building, and the Leasehold, which is the ground lease (id.,~ 45). Prior to June 2019, nominal defendant 477 Madave Holdings, LLC (Madave Holdings), a New York limited liability company, held title to the Fee (id., 10, 40 and 48; NYSCEF Doc No. 19, Bardavid affirmation, exhibit 10). 4 77 Madave Management Corp. (Madave Management), a Delaware corporation (NYSCEF Doc No. 20, Bardavid affirmation, exhibit 11), owns a 0.5% membership interest in Madave Holdings (NYSCEF Doc No. 1, ~ 10). Nominal defendant 477 Madave Associates (Madave Associates) (together with Madave Holdings, the Nominal Defendants) (the Nominal Defendants with Madave Management, collectively, the Madave Entities), a New York general partnership, owns a 99.5% interest in Madave Holdings and was the ground lessor for the Property (id., 39 and 49). Joseph, Sylvia, Alan and Barbara were Madave Associates’ original partners (id.,~ 74). Upon his death, Alan’s partnership interest transferred to his children’s trusts and to Alan’s Trust (id.,~ 76). Madave Associates’ present partners and their ownership interests are as follows: Barbara, individually (33.5%); Barbara’s Trust (16.5%); Alan’s Trust (16.5%); Randy’s Trust (11.1667%); Michael’s Trust (11.1667%); and, David’s Trust (11.1667%)1 (id.,~ 50). The partnership agreement dated November 5, 1984, provides that the managing partner shall make the decisions affecting the partnership, including the sale of any assets, the proceeds of which would be distributed in accordance with each partner’s proportionate share (id., 39, 69 and 77). Barbara is Madave Associates’ sole managing partner (id., 2-3 and 70).”

“Defendants contend that plaintiffs are not proper derivative plaintiffs for three reasons. First, defendants assert that Randy is motivated by personal animus. Randy has repeatedly sued, or threatened to sue, Barbara related to the sale of the Property and the allocation of the proceeds. After having recovered the Arbitration A ward, Randy has now sued Hecht with respect to the allocation (NYSCEF Doc No. 12 at 40-45). As recently as July 14, 2023, Randy, through counsel, demanded that Barbara transfer $19,307,649.58 to Barbara’s Trust and $12,871,766.10 to Alan’s Trust to make them “whole” and urged her to “retain counsel . . . so that we can resolve this amicably without the need for further proceedings” (NYSCEF Doc No. 18, Bardavid affirmation, exhibit 9 at 2). Second, defendants contend that plaintiffs are situated differently from the Nominal Defendants’ other owners because Randy’s Trust has been made whole, and therefore, plaintiffs lack an incentive to pursue claims on behalf of the other owners. Third, those other owners have settled their claims with respect to the allocation and have released defendants from liability.”

“

Villaver v Paglinawan 2024 NY Slip Op 04159 Decided on August 7, 2024
Appellate Division, Second Department concerns a situation where plaintiffs sued defendants who moved to dismiss based upon an arbitration clause. The arbitration was closed when Plaintiff said he could not afford the arbitration and Defendants did not respond.

“Thereafter, the plaintiff commenced this action (hereinafter the present action) against the defendants to recover damages for legal malpractice, breach of fiduciary duty, and intentional infliction of emotional distress, and for a judgment declaring that the defendants waived their right to arbitrate the plaintiff’s claims, that arbitration would be prohibitively expensive, and that requiring the plaintiff to pursue her claims in arbitration would violate her due process rights. The defendants moved, inter alia, to dismiss the complaint pursuant to CPLR 3211(a)(5) on the ground that the doctrine of collateral estoppel precluded the plaintiff from relitigating issues against the defendants that were previously dismissed by the Supreme Court in the prior action. In an order entered May [*2]12, 2021, the Supreme Court, Queens County (Frederick D.R. Sampson, J.), granted that branch of the defendants’ motion. The plaintiff appeals.

Pursuant to CPLR 3211(a)(5), a party may move to dismiss a cause of action based on the doctrine of collateral estoppel (see 23 E. 39th St. Dev., LLC v 23 E. 39th St. Mgt. Corp., 172 AD3d 964, 967). Under the doctrine of collateral estoppel, or issue preclusion, a party is precluded “from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party or those in privity, whether or not the tribunals or causes of action are the same” (Ryan v New York Tel. Co., 62 NY2d 494, 500; see Cullen v Moschetta, 207 AD3d 699, 700). “This doctrine applies only ‘if the issue in the second action is identical to an issue which was raised, necessarily decided and material in the first action, and the plaintiff had a full and fair opportunity to litigate the issue in the earlier action'” (City of New York v Welsbach Elec. Corp., 9 NY3d 124, 128, quoting Parker v Blauvelt Volunteer Fire Co., 93 NY2d 343, 349; see Jaber v Elayyan, 191 AD3d 964, 966). “The party seeking to invoke collateral estoppel has the burden to show the identity of the issues, while the party trying to avoid application of the doctrine must establish the lack of a full and fair opportunity to litigate” (Matter of Dunn, 24 NY3d 699, 704; see HSBC Bank USA, N.A. v Pantel, 179 AD3d 650, 651).

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